Consider a hedge fund with $400 million in assets,60 million in debt,and 16 million shares at the start of the year; and $500 million in assets,40 million in debt,and 20 million shares at the end of the year.During the year investors have received an income dividend of $0.75 per share.Assuming that the fund carries no debt,and that the total expense ratio is 2.75%,what is the rate of return on the fund?

Question

Quizplus · Accepted Answer

The rate of return is calculated as the change in net asset value (NAV) plus dividends, minus expenses, divided by the initial NAV. Initial NAV = ($400M - $60M) / 16M shares = $21.25. Final NAV = ($500M - $40M) / 20M shares = $23. Dividends = $0.75. Expense = 2.75% of initial NAV. Rate of return = [(23 - 21.25 + 0.75) / 21.25] - 0.0275 = 8.52%.

Consider a Hedge Fund with $400 Million in Assets,60 Million