Describe your understanding of a hedge fund

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Question: You are considering investing in a hedge fund. Before you make the decision of investing in the hedge fund, you need to do some research about it and here are some key questions you are trying to address:

a. Describe your understanding of a hedge fund. What are the major two biases hedge fund data or performances could have? Also explain those two biases.

b. If you are comparing hedge fund with mutual fund, what could be the main differences? Please explain three differences. 

c. After finishing some research, you have decided to invest $20 million at the beginning of the year into a hedge fund, which charges a management fee of 2.5% and an incentive fee of 21% with a 7% hurdle rate. At year end the value of the investment is $23.2 million. The incentive fee is calculated net of the management fee and the management fee is based on the year ­end value. What is the net­ of­ fees return you have earned?

Reference no: EM132760280

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