ANSWER 1:

A wealth fund, sovereign wealth fund, sovereign investment fund or social wealth fund is a state-
sponsored investment fund that is likely to invest in real and financial assets like stocks, bonds, real
estate, precious metals, or in alternative investments like equity funds or hedge funds. Sovereign
wealth funds used to invest globally.

As Evan is portfolio manager at finance advisors and is the most important factor to consider when
looking at investing in mutual, exchange traded closed-end fund's assets, implementing its investment
strategy and managing day-to-day portfolio trading. Now as Evan is planning to include real estate in his
portfolio.

As a real estate portfolio manager,

● you study the use of commercial land

● research the market value

● negotiate funds

● allocate resources over properties

● handle portfolios of large companies

● offer your services to institutional investors

Approaches to value the real state:

Approaches to value are the methods or procedures by which evaluation of property is ascertained. For
various properties, a unique approach to value is used.
While valuing the real state , Evan must consider the fundamental three approaches which are:

1. Sales comparison approach:

The sales comparison approach is the most typically used approach within the land estimating practice
for obtaining the worth. In this approach to worth, the property which is meant to be estimated is in
contrast to recently sold properties which are of equivalent types. This is done for carrying out a value
demonstration. For this purpose, the property meant to be estimated is class with proportionates that are
adjusted for size, acreage, amenities, time etc.

The estimator's experience is very important when it comes to understanding the adjustments which are
fairly good for a certain trading area.
This approach to worth is occupied for estimation of free or unoccupied land, improved properties or land
deemed to be vacant.

2. Cost approach:
The cost approach to value estimates the worth of a property by determining the price that will be
required for constructing a replacement or reproduction of the identical property after deduction of
accrued depreciation.

Accrued depreciation means decline within the property actual value over the amount of your time
because of obsolescence or wear and tear.

3. Income capitalization approach:

This approach to value is employed to derive a worth indication for a property that generates income. This
can be done by finding property value by converting the anticipated benefits. In case of this approach, the
future/long-term benefits of a property's present value are estimated.

Approaches for the valuation of REITS:

A Real estate investment trust is a fundraising company that owns, operates or financially support
income-producing real estate.

REIT valuation VS Traditional valuation:

Investors who want to estimate the worth of a Real Estate Investment Trust will certainly came across
that traditional metrics such as:
● Earning per share (EPS)

● Price to earnings (P/E) don't apply.

● A more reliable method is actually a figure called funds from operations (FFO).

REIT Valuation:
REIT valuation is often performed by analysts using the subsequent four approaches:
● Net asset value (NAV)

● Discounted cash flow (DCF)

● Dividend discount model (DDM)

● Multiple and cape rates

Summary of REIT valuation methods:

 REIT Type Description
1.NET Asset Value (NAV) The NAV is the most typical REIT valuation
approach. Instead of estimating future cash
flows and discounting them to the current (as is
that case with the normal valuation approaches),
the NAV approach is a tool to calculate a REITs
value simply by assessing the fair market worth
of real estate. As a result, NAV is most usually
favored in REIT valuation because it relies on
market prices in real estate markets to obtain
value.

2.Discounted Cash Flow (DCF) The discounted cash flow approach is

comparable to traditional DCF valuation for
other industries.

3.Dividend discount model (DDM) Because the majority of a REIT's profit is

distributed immediately as dividends,the
dividend discount model is additionally utilized
in REIT valuation. The DDM discounts all
future expected dividends to the current worth
at the cost of equity.

REIT valuation using NAV:

The NAV is that the most typical REIT valuation approach.

Formula for Net Asset Value:

The NAV formula is as follows:
Net asset value = value of assets - value of. liabilities

Where,
● Value of assets is that the value of all the securities within the portfolio

● Value of liabilities is actually the value of liabilities and fund expenses (such as staff
salaries, management expenses, operational expenses, audit fees, etc).

● The NAV is most usually represented on a per-share basis. In such a case, the formula would
be:

Net asset value = value of assets - value of liabilities/ Total shares outstanding.

Example:
An investment trust manages an open-end investment company and would love to calculate the actual asset
value for a single share. The investment trust is given the following information regarding it's mutual fund.
● Value of securities in portfolio : $75 million (based on end day of closing)

● Cash and cash equivalents of $15 million.

● Accrued income for the day of $24 million

● Short term liabilities of $1 million

● Long term liabilities of $12 million

● Accrued expenses for the day of $5000

● 20 millions shares outstanding

Net asset value = $75000000+$15000000+$24000000

-$1000000-$12000000-$5000000 /20,000,000
= $5.05

Interpreting the net asset value :

The net asset value represents a fund's market worth . When expressed at a per-share value, it represents a
fund's per unit market worth. The per-share value is actually the price at which investors can purchase or
sell fund units.

When the networth of the securities in the fund goes up, the NAV goes up.
Conversely, when the net worth of the securities goes down, the NAV goes down.
● If any worth of the securities within the fund increases, the NAV of the fund increases.

● If the worth of the securities within the fund decrease, the NAV of the fund decreases.

Key Takeaways:
● Net asset value is that the value of a fund's assets excluding funds liabilities and
expenses.

● The NAV (on a per-share basis) represents the value at which investors can purchase or sell
units of the fund.

● When the worth of the securities within the fund increases, the NAV increases.

● When the worth of the securities within the fund decreases, the NAV decreases.

● The NAV number alone offers no insights on how "good" or "bad" the fund is.

● The NAV of a fund should be checked out over a timeframe to assess fund performance.

ANSWER 2:

MNS Private Equity Fund is a worldwide focused investment company focused on private equity and
merchant banking with investments in businesses across multiple asset classes in between from land,
financial services, technology, media and manufacturing.

So here Allena has been asked by her manager to prepare a report on the strategies followed by the
private equity funds for making investments.

Allena has to formulate a short, sharp and concise document on the strategies followed by the private
equity funds for making investments.

General introduction:
The process of understanding private equity is quite simple, but the execution is so far so difficult. The
estimated capital that has happened to raise by venture capital funds and private equity will soon reach
one billion dollars.

While this might seem to be enticing, it is actually very hard to achieve success without proper private
equity investment strategies.
Key private equity investment strategies:
1.Venture capital (VC) investments 2.Growth
Capital
3.Real Estate 4.Mezzanine
Financing 5.Leveraged
Buyout (LBO) 6.Funds of
Funds (FoF)

1. Venture capital (VC) investments:

The private equity model references equity investments in very riskier transactions that might yield a
high reward. This usually alludes to newly formed companies and start-up businesses that have little
track record of profits.

The firm's investing in these companies aim to require advantage of potential at a really attractive
price.

Venture capital firms are most commonly confused with angel investors, however, they also have some
of the key differences.

First, VCs are a class of individuals that are part of a bigger firm or corporation. On the opposite hand,
angel investors work alone, investing their own money. Venture capitalists can typically provide a bigger
amount of financing.

2. Growth Capital:
Growth capital regards institutional investors that finance more grown and established companies with
a good track record of success and superb business model.
These companies are searching for additional funds to restructure or expand their business operations. They
also fundraise to creat major mergers or acquisitions.

3. Real Estate:
Real estate is another avenue of raising private equity capital. This asset class involves a bunch of
investors pooling to take a position by investing in properties. The four different strategies utilized here
include:

Core:
In the stock market, the term ‘core’ is employed interchangeably with ‘income’. Core land
investments are investments made in low-turn/low-risk properties that generate regular
income/cash-flow.

Core plus:
This investment is within the moderate-turn/moderate risk category. This sort of investment aims to obtain
a value added element approach as well. Core plus owners could also be able to increase cash flows by
making small improvements in management, the net property, or the standard of tenants.
Value added:
Value added investments are actually medium-to-high return/medium-to-high risk. The strategy is all
about buying properties with little to no income but the nice potential. This kind of strategy is applicable
to properties that have substantial capital constraints, management issues or need practical improvements.

Opportunistic:
Opportunistic investments are commonly high risk/high return. This strategy involves acquiring
properties that need plenty of enhancements, even greater than value added. A few types in this category
include mortgage notes and raw land. Typically, these investments have limited partners because of high
risk involved.

4. Mezzanine Financing:
Mezzanine financing divulges from the different investment strategies on this list because it contains both
debt and equity.

Companies acquiring debt capital provide the lender with the choice of converting to an equity interest or
full ownership within the company if the funds don't seem to be appropriately repaid.

The primary reason behind why such a lot of choose this growth equity option is the ability to induce
capital injection without having to lose the equity ownership provided the debt would be repaid fully and
timely.

There are also downsides to this current form of financing . This is basically due to the lack of
collateralization of assets. This puts the lender at major risk.

5. Leveraged Buyout (LBO) :

Leveraged buyouts may be highly rewarding. In this asset class, the corporation takes up a great
amount of capital - through bonds and loans - to obtain other companies.

The buyout is leveraged within the maximum amount as 90% debt and only 10% being contributed by
their own funds. Since there's high utilization of debt, it may result in substantial interest payments for
the target corporation.

The idea of leveraged buyout is to form enough returns on the acquisition to offset the interest cost. Many
private equity firms choose this feature because it can generate a considerable amount of return while only
risking a small portion of their capital.

PE firm's raising through leveraged buyouts might also sell a little portion of their acquisition for a profit
while holding onto the remaining portion to scale back the debt.

6. Fund of Funds (FoF) :

 A fund of funds, a multi-manager investment, is a kind of investment that is made in private equity
funds instead of directly in bonds, stocks, and securities. Fund of funds is commonly related with
greater investment diversification and lower risk.

Conclusion :
Now the question arises “which strategy is actually the best among all? ”

The answer to this above question is the same as many in businesses: it depends like anything, the success
of any investment plan relies upon an excess of external factors like the economy and social or
technological trends.

Comparing VC and PE firms both have the potential to generate reasonable profits. However, PE firm's
are capable of paying out greater than the venture capital firms more usually due to the factors
like bigger fund sizes.

Many large buyouts might not be as lucrative since, debt with a high yield doesn't come cheap, but
middle market buyouts remain the same attractive even now.

Overall, there's a greater amount of opportunities for seeing growth in emerging markets than in
developed markets. The power of the greater profits globally has fuelled the expansion behind PE firms.

ANSWER 3:

3a.
Solution:
Management fee @2% = 2/100×100
= $2million
Net fund has increased to $140million @40% because the initial investment was $100million Now,
lets calculate the;
Incentive fee = 25% of [140-100-2-(5%×100)]
= 25% (38-5)
 = 25% × 33
= $8.33million

Net return/effective return = 40-2-8.33

= $29.75million

Effective return= 29.75÷100×100

= 29.75%

3.a. Explain the various benefits associated with the Alternative Investments.

Answer:
An Alternative Investment is an investment in any asset class excluding bonds, cash and stocks.
Some of the types of alternative investments are:
● Private Equity

● Venture Capital

● Private debt

● Hedge Funds

● Real Estate

● Commodities

Alternative investments have been on the peak since 2005 as more investors and financial advisors have
begun to find investment techniques and ways outside of traditional stocks and bonds.
Here are 3 benefits of investing in illiquid alternative investments.

1. Mitigate market volatility:

Alternative assets often cushion market volatility present in a lot of traditional investments like those
found in general public markets. This could take place by investing in asset classes like private equity
that feature low correlation to the markets.

The investors all over the world have the same psychic and have a tendency to react hastily when the
market gets down as they don't have any idea about the deep rooted causes of the volatility. The long
lock-up period of the alternative Investments decreases preemptive reactions
to risk and creates a neutral hedge against the myopic knee-jerk reactions of the average investor.

2. Lower transaction costs:

The investing for a short-term period often demands high amounts of turnover, which in turn refers to
the creation of high transaction costs. While investing for short-term sometimes yields high returns, a
number of these benefits are usually offset by the costs associated with maintaining and rebalancing a
portfolio.

It is usually hard to create a model/demo to produce a certain portfolio for increased returns while
limiting high transaction costs.

Alternative investments used to have high transaction costs in comparison with other traditional kinds of
investments. This is also a fact that these investments are probably not subjected to high turnover and
ongoing maintenance and transaction costs.

3. Tax Benefits:
As a general alternative investment, investment for long periods of time (longer than 12 months) used to
have some tax benefits. These long-term investments are subject to long-term capital gain tax, which is
usually smaller than the taxes incurred from investments having a short time span.

Further adding, capital gain tax usually incurred upon realized gains. As a result, for the long-term illiquids
alternatives, these investments have a chance to hedge against short-term capital gain taxes.