Alternative Investments Q75

75An investor is contemplating investing $1000 million in either Giyani Hedge Fund or Beta Fund of Funds. Beta has a “1.25 and 15” fee structure and invests 15 percent of its assets under management in Giyani. Giyani has a standard “3 and 25” fee structure with no hurdle rate. Management fees are calculated on an annual basis on assets under management at the beginning of the year. Management fees and incentive fees are calculated independently. Giyani has a 30 percent return for the year before management and incentive fees. An investor would choose to invest in Beta Funds of Funds instead of Giyani Hedge funds because of:

Option : A
Explanation : Funds of funds presumably have some expertise in conducting due diligence on hedge funds and may be able to negotiate more favorable redemption terms than an individual investor in a single hedge fund.

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