Author Topic: Why does Fairfax India use leverage?  (Read 2142 times)

RichardGibbons

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Re: Why does Fairfax India use leverage?
« Reply #10 on: June 21, 2019, 11:51:29 AM »
Also worth noting that the performance fee isn't 20%, but rather 20% of the amount above a 5% hurdle per annum growth in NAV.  Because the performance fee is based on NAV, I think, in effect, it comes out after the management fee.

So, for your 8% example, I think the return would actually be (8%-1.5%) - (8% - 1.5% - 5% * 0.2), or 6.2%, not 4.9%.




dartmonkey

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Re: Why does Fairfax India use leverage?
« Reply #11 on: June 24, 2019, 08:44:22 PM »
You do not have the correct performance fee terms: FFH takes 20% of the return beyond 5%, not 20% of the total return. In your example of an 8% return, that would be 20% of 3%, plus the 1.5% management fee, so client teturns would be 5.9%, not 4.9%.