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Alternative Inv READING 79 Performance Appraisal and Return Calculations Exam Questions With Well Elaborated Answers. $12.99   Add to cart

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Alternative Inv READING 79 Performance Appraisal and Return Calculations Exam Questions With Well Elaborated Answers.

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Total Fees - correct answer Which waterfall structure is better for LP - correct answer European PERF FEE = CARRIED INT = INCENTIVE FEE - correct answer ...

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  • August 22, 2024
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RealGrades
Alternative Inv READING 79
Performance Appraisal and Return
Calculations

Total Fees - correct answer



Which waterfall structure is better for LP - correct answer European



PERF FEE = CARRIED INT = INCENTIVE FEE - correct answer



-> after fees rate of return - correct answer V1 - V0 - Total Fees / V0



In PE u pay fees on - correct answer comitted capital



5% soft hurdle rate, and uses a high-water mark.



2) V1 = 119M

V1 Net of mgmt Fee = 117

6.4% return 5% SOFT HURDLE RATE

HWM = 110M / Perf fee = 20%



3) if 5% HARD HURDLE RATE - correct answer We compute the return net of
mgmt fees. ( V1 / V0 - 1 ).



-It is les than the soft hurdle rate -> we dont compute perf fees



2) Higher than the 5% soft hurdle rate -> Performance fees of 20% on 7M

, 3) we charge fees only on gains more than 5% above the high water mark -> More than 1.05 * 110 =
115.5



How to determine the HWM - correct answer Until there is fees the High
Water Mark ( HWM ) is the highest reported value of the fund precedently recorded



If there is perf fees they are computed on the amount above the HWM and if the value after perf and
mgt fees is higher than the highest NAV reported, this is the new HWM



1) American-style (deal-by-deal) waterfall structure



vs



2) European-style waterfall structure - correct answer If there is 2 deals



1) We compute fees separately on each deal -> calculate perf fees on each deal



2) We compute fees on both inv



Example of clawback provision



2inv with a clawback provision / 20% perf fee



1. 130 M return - 100M invested -> 30 M gain



2. 80 M return - 100 M invested -> 20 M perte - correct answer 1. Perf fee =
6M soit 20%*30M we OK til the 2nd inv



2.After the second inv the total return is 30 - 20 = 10M

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