Business Case Study Assistance
Budget: $25 – $50 USD
CASE STUDY PROMPT:
A multi-strategy hedge fund is looking to expand into a Commodities strategy and the investment committee must decide whether to do 1 of 2 things:
1. Build out the strategy in-house, leveraging internal resources
2. Buy the strategy by acquiring XYZ Capital, a boutique fund with a small team and proven track record but looking for operational scale
CASE STUDY TASK:
You are tasked with evaluating both options and presenting a recommendation to the Investment Committee. Your deliverables include a presentation and financial model.
The presentation should include, but not limited to:
• Executive summary & recommendation
• 5Y financial projections and supporting analysis for each option
• Major assumptions and risks for each option
• Identify key diligence questions and information gaps
• Open items and questions for Investment Committee to discuss
CASE STUDY ASSUMPTIONS:
1. Build out the strategy internally assumptions:
• Existing platform has no Commodities portfolio managers (PMs) but has a lead PM lined up for immediate start
• Assume $300M of investor capital is available for the new strategy
• Time to stand-up trading infrastructure: 12 months
• Expense estimates:
o $10M for infrastructure build; assume $2M for ongoing opex
o Assume $1M total compensation per PM team per year
o Assume staggered starts for 3 PMs over the first year; include an assumption on recruiting fees per hire
o Assume PM annual bonus payout is 20% of their returns
• Assume PM target returns of 20–25% once they ramp up
2. Acquire XYZ Capital assumptions:
• AUM: $200M
• Gross management fees (2% fee): $4M, all used to cover opex
• Performance fees (20% fee): $8–10M
• 10 employees (1 founder/PM, 2 PMs, 7 FTEs)
• Assume PM bench with track records similar or better than recruits in market
• Compensation unknown; estimate PM annual payouts are 15% of their returns
• Propose a deal structure for the acquisition; this should include an incentive sharing agreement for the key investment team member(s)
A multi-strategy hedge fund is looking to expand into a Commodities strategy and the investment committee must decide whether to do 1 of 2 things:
1. Build out the strategy in-house, leveraging internal resources
2. Buy the strategy by acquiring XYZ Capital, a boutique fund with a small team and proven track record but looking for operational scale
CASE STUDY TASK:
You are tasked with evaluating both options and presenting a recommendation to the Investment Committee. Your deliverables include a presentation and financial model.
The presentation should include, but not limited to:
• Executive summary & recommendation
• 5Y financial projections and supporting analysis for each option
• Major assumptions and risks for each option
• Identify key diligence questions and information gaps
• Open items and questions for Investment Committee to discuss
CASE STUDY ASSUMPTIONS:
1. Build out the strategy internally assumptions:
• Existing platform has no Commodities portfolio managers (PMs) but has a lead PM lined up for immediate start
• Assume $300M of investor capital is available for the new strategy
• Time to stand-up trading infrastructure: 12 months
• Expense estimates:
o $10M for infrastructure build; assume $2M for ongoing opex
o Assume $1M total compensation per PM team per year
o Assume staggered starts for 3 PMs over the first year; include an assumption on recruiting fees per hire
o Assume PM annual bonus payout is 20% of their returns
• Assume PM target returns of 20–25% once they ramp up
2. Acquire XYZ Capital assumptions:
• AUM: $200M
• Gross management fees (2% fee): $4M, all used to cover opex
• Performance fees (20% fee): $8–10M
• 10 employees (1 founder/PM, 2 PMs, 7 FTEs)
• Assume PM bench with track records similar or better than recruits in market
• Compensation unknown; estimate PM annual payouts are 15% of their returns
• Propose a deal structure for the acquisition; this should include an incentive sharing agreement for the key investment team member(s)