A fund of funds invests across many hedge funds with an expected return of 7% before...

A fund of funds invests across many hedge funds with an expected return of 7% before fees in a particular year. Hedge funds charge 2% 20% for management and incentives fee, respectively. Fund of fund investors require an expected return of 3%. What type of fee structure (incentive fees and management fees) for the fund of fund delivers an expected return of 3%? Plot a graph (incentive fees as a function of management fees) that displays the plausible combinations.

Expert Solution

Rahul Sunny answered 1 year ago

Explain similiarities between hedge funds and absolute return fund

Explain differences between hedge funds and absolute return fund

8. A hedge fund charges 2% plus 20%. A pension fund invests in the hedge fund....

8. A hedge fund charges 2% plus 20%. A pension fund invests in the hedge fund. Plot the return to the pension fund as a function of the return to the hedge fund. The incentive fee of 20% is charged on the return after subtracting the annual 2%. No incentive fee is charged if the return after subtracting the annual 2% fee is negative. [hint: Probably best if you do this in Excel, however, you could also use grid paper...

Assume the following information pertains to three mutual funds FUND Expected Return Standard Deviation of Return...

Assume the following information pertains to three mutual funds FUND Expected Return Standard Deviation of Return U.S. Bond 6% 12% U.S. Equity 11% 20% U.S. REIT 8% 18% Assume that the correlation between U.S. Bond and U.S. Equity is 10%, the correlation between U.S. Bond and U.S. REIT is 70%, and the correlation between U.S. Equity and U.S. REIT is 60%. a) What is the standard deviation of this portfolio of 20% Bond, 20% REIT and...

1) Consider two different hedge funds with the following data related to performance: Hedge fund ...

1) Consider two different hedge funds with the following data related to performance: Hedge fund Alpha Beta Fund A 5% 1.6 Fund B 3% 0.8 Assuming that beta is consistent with the type of investing we expected in both cases, which fund performed better. A. Fund A, because it had the higher return B. Fund A, because it had the higher alpha C. Fund B, because its alpha is more impressive than Fund A...

CRITICAL THINKING QUESTION Hedge Fund Strategy A critic recently claimed that hedge funds cause market volatility...

CRITICAL THINKING QUESTION Hedge Fund Strategy A critic recently claimed that hedge funds cause market volatility to increase when they publicize (and document) that a public corporation exaggerated its earnings. The critic argued that hedge funds should not be allowed to make such public statements, and should not be allowed to take short positions that bet against the firm that is being criticized. Write a short essay that supports or refutes this opinion.

A large institutional investor is considering three Exchange Traded Funds: Fund Expected Return Standard deviation Internet...

A large institutional investor is considering three Exchange Traded Funds: Fund Expected Return Standard deviation Internet ETF (Q) 11% 16% Health Care ETF (H). 9% 12% T-bill money-market ETF 4% The two ETFs, Q and H are uncorrelated. 1. Find the proportions of each asset, and the expected return and standard deviation of the tangency portfolio. 2. What is the reward-to-variability (Sharpe) ratio of the best feasible capital allocation line? 3. Suppose this investor is highly risk averse with a...

Fund A offer an expected return of 8% with a standard deviation of 15%, and Fund...

Fund A offer an expected return of 8% with a standard deviation of 15%, and Fund B offers an expected return of 5% with a standard deviation of 25%. a. Would Fund B be held by investors?Explainwith the aid of a diagram using Markowitz Portfoliotheory.(8marks) b. How would you answer part a. if the correlation coefficient between Funds A and B were 1? Could these expected returnsand standard deviationsrepresent an equilibrium in the market?(12marks)

A hedge fund earns a mean annual return of 20% with a 10% standard deviation. One...

A hedge fund earns a mean annual return of 20% with a 10% standard deviation. One year, the fund return is -10%. What is the probability of a result bad or worse happening?Assume the distribution is symmetrical. (Hint: use Chebyshev’s Inequality). a.) 11% b.) 12.5% c.) 25% d.) 5.5%

Alex has two funds A and B. The annual return of fund A is denoted by...

Alex has two funds A and B. The annual return of fund A is denoted by X (in %) while the annual return of fund B is denoted by Y (in %) . Assume X ∼ U (−10, 20) and Y ∼ N (10, 50). Further, suppose the probability that both stocks A and B have positive annual returns is 0.6. Find the probability that stock A has a negative return. Find the probability that stock B has a positive...

Question