Question 1
Consider a
hedge fund whose annual fee structure has a fixed fee and an incentive fee with
a high
watermark provision. The fund manager earns an incentive fee only if the fund
is
above the
high watermark of the maximum portfolio value since the inception of the fund.
Required:
Assess the positive and negative implications of the high
watermark provision for the
investors of the hedge fund.
–
Require
only 200 words for
this section
–
5
points [ positive and negative implications for the high water mark provision]
–
Need
to be based on Harvard referencing style and each point had to be from
different sources.
–
If
applicable had to include relative examples for the point stated.
[5 marks]
Question 2
A hedge
fund has compiled a list of French firms that it believes will outperform the
overall
French
stock market by 7 percent over the year. It also has compiled a list of French
firms
that it
believes will underperform the overall French stock market by 7 percent. The
hedge
fund wants
to invest in a market-neutral long/short strategy on the French stock market.
It
has a
capital of €25 million for this purpose. However, it would like to retain a
cash cushion
of €1
million for unforeseen events. The hedge fund can borrow shares from a primary
broker with
a cash margin deposit equal to 20 percent of the value of the shares. No
additional
costs are charged to borrow the shares.
Required:
Outline the appropriate strategy for the hedge fund. [Require only 100 words here]
–
Had
to list 5 steps for the chosen strategy ; include a formula on how to compute
the following
–
The
strategy had to counter the over value and under value of the French stock.
–
Need to be based on Harvard
Referencing; if possible 2 resources to be used here.
–
What
is the leverage can the hedge fund take on>?
[5 marks]
Question 3
Sam
Short, CFA, has recently joined the investment management firm of Green, Spence
and Smith (GSS). For several years, GSS has worked for a broad array of
clients, including employee benefit plans, wealthy individuals and charitable
organisations. Furthermore, the firm expresses expertise in managing stocks,
bonds, cash reserves, real estate, venture capital and international
securities. To date, the firm has not utilized a formal asset allocation
process but instead has relied on the individual wishes of clients or the
particular preferences of its portfolio managers. Short recommends to GSS
management that a formal asset allocation process would be beneficial and
emphasizes that a large part of a portfolio’s ultimate return depends on asset
allocation. He is asked to take his conviction an additional step forward by
constructing a proposal to the executive management.
Requirement
As a portfolio manager, had to
establish a diversified portfolio and choose an asset.
The following portfolio must be
recommended to GSS.
Compare and contrast 2 companies –
had to be from the same industry.
I had chosen the automotive
industry [Kia vs Hyundai]
, and their country of origin is South Korea.
Choose an appropriate asset
allocation method for the chosen companies based on their current allocation
method performance? Etc, Bonds?
If they chose that method, why isit
useful for them? What is the history of the industry in the asset allocation
method?
If so, what are the factor causing
them to underperformed / over performed?
Had to find the chosen company
Return Rate, Standard Deviation and Covariance, … the data had to be 3 years of
daily returns to establish its performance.
Based on the earlier computed data,
had to form an efficient frontier graph, and compute their CML Line
Graph..compare them with the market.
Need to be based on Harvard Referencing; if possible 5 resources to be
used here
Need to allocate 700 words in this section.
