Valuation and exit - hedge fund, Financial Management

Assignment Help:

Valuation and Exit

Valuation: The Net Asset Value is used as a base for ascertaining the prices applicable to investor subscriptions and redemptions. Fund administrator performs the NAV valuation. NAV calculations should include accrued interest, dividends, and other receivables of the Hedge Fund, as well as accrued expenses (including fees) and other payables. Most of the Hedge Funds are issued with close-ended features (vice-versa in case of FoFs and offshore funds) and valuation of NAV is the major concern voiced by the industry analysts and fund managers about their portfolio of holdings. The NAV valuations are prone to manipulation (due to lack of transparency) and underestimation due to improper selection of benchmarks.

Generally, investment strategy for valuation is divided into two categories (see Table 5): ‘Easy-to-value' and ‘"Hard-to-value' strategy. Easy-to-value strategies constitute 80 percent of overall total asset management and rest 20 percent accompanied with Hard-to-value strategies. The differentiation arises, as it is difficult to estimate the value of investments that are based on various factors and long-term nature of investment.

Exit: Hedge Funds are issued with a lock-up period usually of three years to arrest outflow of funds. As soon as the funds lock-up period comes to an end, investors have the option to exit from the funds by selling either to fund houses (in case of open-ended schemes) and to other eligible investors (in case of close-ended schemes). The redemption or exit price is determined on the basis of the NAV valuation, which the Hedge Fund issues in its monthly, quarterly, or annual reports. Exiting from the fund by offering to the third party might involve the fund manager's intervention on when he feels the transfer of shares can have negative impact on future Fund operations.

 


Related Discussions:- Valuation and exit - hedge fund

Explain the compound interest, What is compound interest? Compare compound ...

What is compound interest? Compare compound interest to discounting. Compound interest takes place while interest is earned on interest and on the original principal of an invest

Objective of having frequent brainstorming sessions, Case Study: Silico...

Case Study: Silicon Cliffs is a big private company that undertakes consultancy activities and services in the field of building construction. Silicon Cliffs has gained peoples

Elements of financial management, Elements of Financial Management: Fin...

Elements of Financial Management: Financial management is the term given to the overall management of an organisation's finances. It includes a number of elements, or systems,

Share-based payments and retirement benefits, Applicant should have been we...

Applicant should have been well versed in the calculation of actuarial losses and gains on pensions. It would have been significant to ensure each item affecting liabilities and as

TOOLS TO ACCESS ECONOMIC RECESSION, WHAT ARE THE TOOLS OR MECHANISMS THAT C...

WHAT ARE THE TOOLS OR MECHANISMS THAT CAN BE USED TO ACCESS ECONOMIC RECESSION?

Define working capital, What is working capital? Working capital contains...

What is working capital? Working capital contains the current assets of the firm.

Definition of hedge fund, Definition The term "Hedge Fund" is a colloqu...

Definition The term "Hedge Fund" is a colloquialism derived from the expression "to Hedge one's bets", which means to limit the possibility of loss on a speculation by betting

Calculate the amount invested in treasury bonds, You have an investment cap...

You have an investment capital of $1,000,000.  You plan to invest a portion of this money in Treasury bonds and the remainder in a stock portfolio.  Treasury bonds are expected to

Hedge fund, Definition of 'Hedge Fund': An aggressively managed portfo...

Definition of 'Hedge Fund': An aggressively managed portfolio of investments that uses advanced investment strategies define as leveraged, short, long and derivative positions

Importance of commodity finance and sensitive commodities, Question 1 Desc...

Question 1 Describe the importance of commodity finance and sensitive commodities Question 2 Securities purchased by a bank for investment purposes are referred to as seconda

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd