Equity portfolio size million
Equity portfolio beta
S&P Index value
Solution
A fund manages a $2.4 billion equity portfolio with a beta of
.6. If the S&P contract multiplier is $250 and the index is
currently at 1,600, how many contracts should the fund sell to
make its overall position market neutral?
Incentive fee
T-bill rate
Fund performance
Solution
Yr 1 value (base 100) 100
A hedge fund charges an incentive fee of 20% of any investment
returns above the T-bill rate, which currently is 2%. In the first year, the
fund suffers a loss of 8%. What rate of return must it earn in the
second year to be eligible for an incentive fee?
Fund assets million
Management fee
Incentive fee
Money market rate
Solution
Portfolio
returns
Incentive
fee
Mgmt
fee
Total
fee
Total fee
(%)
$ millions
A hedge fund with $1 billion of assets charges a management fee of 2% and
an incentive fee of 20% of returns over a money market rate, which currently
is 5%. Calculate total fees, both in dollars and as a percent of assets under
management, for portfolio returns of:
a. – 5%
b. 0
c. 5%
d. 10%