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jrn0074
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stranger
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Reged: 11/05/03
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Posts: 11
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Loc: Chicago
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Calcuating NAV for hedge funds
#368 - 06/07/04 03:14 PM
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I've read performance reports from some HF's that give a share price at month-end, i.e. a NAV or net-asset-value. I know NAV is generally the assets minus liabilities divided by number of shares outstanding. But how does one set the number of shares or a starting share price for a hedge fund. Say you've started with 5mil under management, what happens when an additional 2mil is invested?
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Re: Calcuating NAV for hedge funds
#384 - 07/06/04 09:48 AM
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For a domestic hedge fund, which is classified as a partnership for tax purposes, each member of the fund is treated as a partner, owning a share of partnership capital and profits and losses, rather than shares (as in a corporation). Every time there is a "break point" (such as when partners contribute more capital), there is a recaculation of each partner's share, and all partnership positions are revalued at their then market value (except for illiquid positions). These computations are often complex.
The bottom line is that there are rules for recalculating partnership interests.
I hope that this is helpful. Best regards, Roger Lorence GTT Legal
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