Hedge Funds case studies, worked step by step

Cases
100
Traced to a firm
31
Topics
13
Hard
30
Topic
All topicsCredit, distressed and capital structure7Earnings, models and KPIs8Event-driven and merger arbitrage7Fund economics, NAV and LP decisions8Global macro trades7Long pitches and valuation14Manager evaluation and attribution7Pairs and relative value5Portfolio construction and sizing7Risk limits and drawdowns7Short selling6Systematic research and data11Volatility, options and convertibles6
Level
AnyWarm upCoreHard
Source
AnyReported at a firmStandard
Showing 31–40 of 69 · filtered from 100Clear filters
  1. 039Ovrin Chemicals' bonds trade at a 600 basis point spread, which with 40% recovery implies about a 10% annual chance of default. Its equity trades at 8x EBITDA, which looks healthy. One market is wrong. Set out the assumptions, build the capital structure trade and say how you size the two legs.Credit, distressed and capital structureHardCredit and distressed funds
  2. 040Aerolva Airlines runs at an 80% load factor with an EBIT margin of 3%. About 80% of its costs are fixed for the season. If the load factor rises to 85% at the same fares, what happens to the EBIT margin?Earnings, models and KPIsCoreLong-short equity fundsMulti-manager platforms
  3. 042Talvir Capital charges a 20% performance fee over an 8% hurdle. At a gross return of 12% on Rs 1,000 crore, what fee does it earn under a hard hurdle and under a soft hurdle with full catch-up?Fund economics, NAV and LP decisionsCoreFund of funds and allocators
  4. 043In the Republic of Kelmar inflation is 7% and the policy rate 6%. You expect the central bank to hike by 150 basis points over six months, while two-year swaps price only 50. Build the trade: which way you position, how you size it with a DV01 of Rs 1.9 lakh per Rs 100 crore, and what you make if you are right.Global macro tradesHardGlobal macro funds
  5. 044Solvika Chemicals has a specialty segment with EBITDA of Rs 300 crore and a commodity segment with EBITDA of Rs 200 crore. Peers trade at 18x and 6x respectively. Net debt is Rs 1,200 crore, there are 50 crore shares and the stock is Rs 85. Build the sum of the parts and say what closes the gap.Long pitches and valuationCoreLong-short equity fundsMulti-manager platforms
  6. 045Oruvel Capital has five ideas with expected alphas of 6%, 8%, 4%, 10% and 5% and volatilities of 25%, 40%, 20%, 50% and 30%. Size each in proportion to alpha divided by variance, with a cap of 8% of NAV. What is the ranking and where does the cap bind?Portfolio construction and sizingHardMulti-manager platformsLong-short equity funds
  7. 046Trevon Capital runs a long-short book at 400% gross on Rs 100 crore of equity, with a prime broker requiring equity of at least 25% of gross. Longs and shorts are equal. How far can longs fall with shorts flat before a margin call, and what happens if longs fall while shorts rise?Risk limits and drawdownsHardMulti-manager platforms
  8. 048The Sethu 50 index has implied volatility of 15%, while its members' average implied volatility is 25%. What average correlation does that imply, and how would you trade a view that realised correlation will be lower?Volatility, options and convertiblesHardVolatility and relative value funds
  9. 052Belvanta Electricals has quarterly revenue of Rs 1,000 crore, a 35% contribution margin and Rs 200 crore of fixed costs. Consensus assumes 12% volume growth and 3% price growth; your channel checks say volume grows 8%. How big is the EBIT miss?Earnings, models and KPIsCoreLong-short equity fundsMulti-manager platforms
  10. 053Ushvin Industries, worth Rs 10,000 crore, will spin off Ushvin Chemicals, with EBITDA of Rs 300 crore against peers at 12x. Index funds holding the parent must sell the new shares. How do you trade the spin-off?Event-driven and merger arbitrageCoreEvent-driven fundsMulti-manager platforms

Company names and figures are illustrative.