Jabavu Investments Services (JIS) operates as a hedge fund with an initial capital of Sh.350 billion....

 

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Jabavu Investments Services (JIS) operates as a hedge fund with an initial capital of Sh.350 billion. JIS charges a 3.2 per cent management fee based on assets under management at the end of the year. JIS also charges a 32 percent incentive fee based on returns which are beyond a 10.2 percent hurdle rate. In its first year, JIS hedge fund appreciates by 17.2 per cent. JIS calculates its management fee using end-of-period valuation. Required: The investors net return. (Assume that the performance fee is calculated net of management fee). c) The table below shows monthly returns for a hedge fund and an index portfolio. The hurdle rate is the 91-day Treasury Bill rate, assumed to be 10% per annum. Month Jan Hedge.7.1 fund return % Index return % 4.9 Feb 3.1 II. iv. -8.1 March April -4.1 -3.3 6.1 May -2.1 June July Aug 1.9 -2.1 3.5 -8.5 4.1. 5.1 -4.3 Sep Oct 5.5 7.5 -4.1 1.1 J Nov 0.9 6.2 Dec -6.5 0.5 The calculated annualized standard deviations for the hedge fund and the index are 16.34% and 17.37 % respectively. Required: i.. The annualized downside deviations for the hedge fund and the index. ii. Contrast the results obtained in (c) (i) above with the calculated annualized standard deviations above. The Sortino ratio for the hedge fund and the index. Comment on the performance of the hedge fund against the performance of the index portfolio based on the result obtained in (c) (iii) above. Jabavu Investments Services (JIS) operates as a hedge fund with an initial capital of Sh.350 billion. JIS charges a 3.2 per cent management fee based on assets under management at the end of the year. JIS also charges a 32 percent incentive fee based on returns which are beyond a 10.2 percent hurdle rate. In its first year, JIS hedge fund appreciates by 17.2 per cent. JIS calculates its management fee using end-of-period valuation. Required: The investors net return. (Assume that the performance fee is calculated net of management fee). c) The table below shows monthly returns for a hedge fund and an index portfolio. The hurdle rate is the 91-day Treasury Bill rate, assumed to be 10% per annum. Month Jan Hedge.7.1 fund return % Index return % 4.9 Feb 3.1 II. iv. -8.1 March April -4.1 -3.3 6.1 May -2.1 June July Aug 1.9 -2.1 3.5 -8.5 4.1. 5.1 -4.3 Sep Oct 5.5 7.5 -4.1 1.1 J Nov 0.9 6.2 Dec -6.5 0.5 The calculated annualized standard deviations for the hedge fund and the index are 16.34% and 17.37 % respectively. Required: i.. The annualized downside deviations for the hedge fund and the index. ii. Contrast the results obtained in (c) (i) above with the calculated annualized standard deviations above. The Sortino ratio for the hedge fund and the index. Comment on the performance of the hedge fund against the performance of the index portfolio based on the result obtained in (c) (iii) above.

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Here are the steps to solve this problem 1 Management fee calculation JIS charges a 32 management fe... View the full answer