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

What is gatt, What is GATT, and what is its goal? GATT is the General A...

What is GATT, and what is its goal? GATT is the General Agreement on Tariffs and Trade it is a agreement that seeks to decrease trade barriers among participant nations.

Step by step approach to completing a statement, Step by step approach to ...

Step by step approach to completing a statement of cash flows Step by step approach to completing a statement of cash flows Step 1

Define the replacement value of assets method, Why is the replacement value...

Why is the replacement value of assets method not usually used to value complete businesses? The replacement value of assets process is not often applied to complete business v

Which formula would you use to solve for the payment, Which formula would y...

Which formula would you use to solve for the payment required for a car loan if you know the interest rate, length of the loan, and the borrowed amount?  Explain. To answer for

Explain cross hedging, Explain cross-hedging and discuss the factors determ...

Explain cross-hedging and discuss the factors determining its effectiveness. Answer: Cross-hedging includes hedging a position in one asset by taking a position in another asse

Weighted average cost of capital, Q. Weighted Average cost of Capital? ...

Q. Weighted Average cost of Capital? When the company capital structure is made from equity share capital , debenture and Preference share capital , then we calculated the comb

Financial maket, knowledge of financial market is power discuss

knowledge of financial market is power discuss

Illustration of total return on investment, Illustration  An inve...

Illustration  An investor with a 1-year investment horizon purchases a 20-year 5% corporate bond. The prevailing price of the bond is Rs.82.3488 for a yield of 6.2%

Brainstorming, Brainstor ming An idea production strategy that exc...

Brainstor ming An idea production strategy that exclusively encourages any and all alternatives while withholding any appreciation of those options.

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