Coltrust Software Development Ltd$.("$Coltrust$")$ is engaged in the development and

distribution of software packages. Coltrust's activities include software exports globally,

software support to a large base of insurance companies in Latin America and data

processing centres specialising in support of operations of insurance companies.

Coltrust's operations are focused on the business process outsourcing $("$BPO$")$ areas

including call centres, financial transaction processing and human resources

management.

Coltrust enjoyed unprecedented growth over the past decade as part of global

outsourcing for insurance companies and banks. To accelerate Coltrust's growth, the

company went public two years ago. Coltrust had also issued increasing debt to build

and outfit call centres and manufacturing plants and significantly expand capacity.

The market for BPO has changed dramatically over the past few years, as the demand for

certain services being provided by clients of Coltrust has declined. This is also

compounded with the increasing use of Artificial Intelligence $("$AI$")$ through internet$-$

connected personal assistants. In addition, the cost savings have become less

advantageous in many cases, as wages and operating costs have been rising rapidly in

the business and manufacturing centres, like where Coltrust is based.

Downside Scenario:

There is a prolong global recession and Coltrust's revenues fall

even faster. Coltrust sells assets in Bankruptcy to pay back

creditors. Likelihood $-10\%$

Required:

$($i$)$ Describe the Hedge Fund strategy used by Randy Capital Inc. as outlined.

$(5$ marks$)$

$($ii$)$ With the Base Scenario being the most likely scenario, describe the investment

approach that Randy Capital Inc. will be possibly taking with respect to its

investment in Coltrust.

$(10$ marks$)$

$($iii$)$ As a result of the specialized nature of Randy Capital Inc. the founders of the firm

established Randy Capital Fund Managers Inc. to manage all aspects of the Hedge

Fund's investment operations. With the aid of a diagram, set out the likely

organizational structure of this Hedge Fund, outlining in detail the roles of the

major entities involved.

$(15$ marks$)$

$($iv$)$ Describe five $(5)$ of the key risks which are expected to be associated with the

Hedge Fund, as outlined.

$(10$ marks$)$