Asset Management

Question 1

What is the role of an asset manager?

Answer 1

To meet the investors expected returns without taking on unnecessary risk.

Question 2

How does an asset manager make money?

Answer 2

Commissions via management fees and incentive via exceeding the hurdle rate. They may also make money from private wealth management - this is helping manage all aspects of a wealth families or individuals finances or foundations and endowments.

Question 3

Risk & Return graph:

Answer 3

Open and closed end mutual funds, Real estate funds, PE funds, hedge funds and alt investments.

Question 4

What are the aims of PE firms?

Answer 4

buy private companies, target established or growth companies. Established funds with the LBO process.
Also distressed companies for a turn around, overlap with hedge funds as well.

Question 5

What is the typical structure of PE for a distressed public company?

Answer 5

1. Acquire all shares
2. delist the company
3. change management
4. improve performance
5. exit investment

Question 6

What do PE funds typically do?

Answer 6

Acquire companies not listed on a stock exchange.

Question 7

what is the typical PE fund structure?

Answer 7

Limited partnerships: two types of partners, general and limited
General -> management and control, management fee and get carried interest.
limited -> investment capital
Management:
This follows the 2-20% compensation structure.
2% management fee, 20% of excess profits - hurdle rate.
limited:
receive the remaining capital.
Close-end fund: newly created entity. Similar compensation