Tiêu đề Level III V5 LM04 Essay Quiz.pdf ✅

Level III Investment Manager Selection Essay Quiz Copyright © IFT. All rights reserved www.ift.world Page 1 TOPIC: PORTFOLIO MANAGEMENT AND WEALTH PLANNING TOTAL POINT VALUE OF THIS QUESTION SET IS 18 POINTS Mattsson Collin Case Scenario Mattsson Collin is a pension plan portfolio manager who is considering various investments for the equity portion of the plan. He first shortlists a small-cap value fund. Charles Branden, the chief investment officer of the plan, asks Collin to conduct a style analysis to confirm the investment process followed by the small-cap value fund manager. Branden believes that the self-reported style categorization of the fund needs to be assessed as the fund manager’s strategy is not fully transparent. He does not want the analysis to be onerous and requires a style check that is not subject to window dressing. Collin discusses the pension plan’s 10% allocation to an equity hedge fund with Branden. The long- short (L/S) equity hedge fund has a 12-month lockup period with no redemption provision. It has a gate of 20 percent of the investment value on the redemption date. Branden expresses his concern about the liquidity of the investment and asks whether investing in either private equity or venture capital is more liquid than hedge funds. Collin reviews the L/S hedge fund’s fee schedule given in Exhibit 1. Exhibit 1 Base fee 0.5% Sharing 20% Maximum annual fee 2.50% Computed fee Higher of either (1) base or (2) base plus sharing of positive performance; sharing is based on return net of the base fee Exhibit 2 shows the annual gross returns for the fund and its respective benchmark in percentages since its inception for 20X1–20X3. The hedge fund also has a high-water mark provision whereby a sharing percentage will only be charged once losses (if any ) have been recouped. Exhibit 2 20X1 20X2 20X3 Gross Return Benchmark Return Gross Return Benchmark Return Gross Return Benchmark Return 11.00 12.00 -5.25 -9.50 10.75 10.00
Level III Investment Manager Selection Essay Quiz Copyright © IFT. All rights reserved www.ift.world Page 2 A. i. Determine the style analysis (returns-based style analysis or holdings-based style analysis) that Collin should conduct to evaluate the investment process of the small-cap value fund manager. Justify your response with three reasons. ii. State two disadvantages of each type of analysis for the small-cap value fund. Restating case facts receive no credit. • Returns-based Style • Holdings-based Style Disadvantages
Level III Investment Manager Selection Essay Quiz Copyright © IFT. All rights reserved www.ift.world Page 3 B. i. Identify the type of the L/S hedge fund lockup (hard lock or soft lock). Justify your response. ii. Determine which limited partnership is the most liquid (hedge fund, private equity, venture capital), all else equal. Justify your response with two reasons. C. i. Based on Exhibit 1 and Exhibit 2, calculate the L/S hedge fund’s investment management fee for 20X1–20X3 without applying the high-water mark provision. ii. Identify the year the L/S fund’s investment management fee will be affected when the high- water mark is applied. Justify your response.
Level III Investment Manager Selection Essay Quiz Copyright © IFT. All rights reserved www.ift.world Page 4