Question

Suppose that you are starting a new venture capital fund. You raised $200 million in committed...

Suppose that you are starting a new venture capital fund. You raised $200 million in committed capital. You will charge a management fee of 2.5 percent per year for the first five years, with a reduction of 25 basis points each year thereafter. Assume that all fees are paid on committed capital, and that your fund has a 10-year life.

a. What are the total amount of fees for your fund?

b. What is percent of the committed capital is paid as fees?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The given question clearly states that for the first 5 years, the rate of fee is 2.5% and then for years 6-10, it decreases by 0.25% per year.

A.) The value of fee for any year will be X% of $200 million capital raised, where X is the rate if fee charged.

The table below shows the various values of the fee.

The total amount of fees (over 10 years) for the fund = $42,500,000

B.) The proportion of fee paid as a percent of committed capital = (Total fee / Total capital raised) x 100

= 42500000 / 200000000 = 0.2125 = 21.25%

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose that Galt Ventures, a venture capital firm, raised $250 million of committed capital. Each year...
Suppose that Galt Ventures, a venture capital firm, raised $250 million of committed capital. Each year over the 10-year life of the fund, 2% of this committed capital will be used to pay Galt's management fee. As is typical in the venture capital industry, Galt will only invest $200 million (committed capital less lifetime management fees). At the end of 10 years, the investments made by the fund are worth $800 million. Galt also charges 20% carried interest on the...
Suppose that Halcyon Capital, a venture capital firm, raised $250 million of committed capital. Each year...
Suppose that Halcyon Capital, a venture capital firm, raised $250 million of committed capital. Each year over the 10-year life of the fund, 2% of this committed capital will be used to pay Halcyon's management fee. As is typical in the venture capital industry, Halcyon will only invest $200 million (committed capital less lifetime management fees). At the end of 10 years, the investments made by the fund are worth $800 million. Halcyon also charges 20% carried interest on the...
Use the following information to answer the question(s) below.Suppose that Halcyon Capital, a venture capital firm,...
Use the following information to answer the question(s) below.Suppose that Halcyon Capital, a venture capital firm, raised $250 million of committed capital. Each year over the 10-year life of the fund, 2% of this committed capital will be used to pay Halcyon's management fee. As is typical in the venture capital industry, Halcyon will only invest $200 million (committed capital less lifetime management fees). At the end of 10 years, the investments made by the fund are worth $800 million....
Suppose that a $1000M VC fund has fees of 2.0 percent per year in all years,...
Suppose that a $1000M VC fund has fees of 2.0 percent per year in all years, with these fees paid on committed capital in the first five years and on net invested capital for years 6 through 10. You can assume the fund is fully invested by the beginning of year 6, and then realizes 20 percent of its investment capital in each of the following five years. What are the lifetime fees and investment capital for this fund? (net...
They forecast new revenues of $100 million in the first year and $200 million in year...
They forecast new revenues of $100 million in the first year and $200 million in year 2, growing at 2.5% per year thereafter. The cost of goods underlying these new revenues is 45 percent of the revenues. To achieve these synergies will require an investment of $400 million initially, and 5% of the added revenue each year, to fund working capital growth. Find the net present value of these synergies using a discount rate of 15% and a marginal tax...
You invested $1,250,000 with a market-neutral hedge fund manager. The fee structure is 2/20, and the...
You invested $1,250,000 with a market-neutral hedge fund manager. The fee structure is 2/20, and the fund has a high-water mark provision. Suppose the first year the fund manager loses 5 percent, the second year she gains 13 percent, and the third year she gains 7 percent. Assume management fees are paid at the beginning of each year and performance fees are taken at the end of each year. What are the management and performance fees paid each year?
Suppose an individual invests $21,000 in a load mutual fund for two years. The load fee...
Suppose an individual invests $21,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 2.5 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating expenses (or 12b-1 fees) are 0.56 percent. The annual fees are charged on the average net asset value invested in the fund and are recorded at the end of each year. Investments in the fund return 8 percent each...
A mutual fund currently manages $500 Million in assets and has issued 10 million shares. You...
A mutual fund currently manages $500 Million in assets and has issued 10 million shares. You invest $100,000 into the fund. Suppose that over the next three years, the fund’s investments without considering fees return 10%, -10%, and 20%. In addition, the fund takes 1% at the start of each year for its management fee. What will have been your annualized return as an investor, and what will be the NAV at the end of the period?
A mutual fund currently manages $500 Million in assets and has issued 10 million shares. You...
A mutual fund currently manages $500 Million in assets and has issued 10 million shares. You invest $100,000 into the fund. (a) What is the NAV, and how many shares will you receive? (b) Suppose that over the next three years, the fund’s investments without considering fees return 10%, -10%, and 20%. In addition, the fund takes 1% at the start of each year for its management fee. What will have been your annualized return as an investor, and what...
Suppose an individual invests $28,000 in a load mutual fund for two years. The load fee...
Suppose an individual invests $28,000 in a load mutual fund for two years. The load fee entails an up-front commission charge of 3.2 percent of the amount invested and is deducted from the original funds invested. In addition, annual fund operating expenses (or 12b-1 fees) are 0.63 percent. The annual fees are charged on the average net asset value invested in the fund and are recorded at the end of each year. Investments in the fund return 8 percent each...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT