Friday, July 22, 2011

Thai Planes and Cross-Cultural Contracts

I just returned to Singapore from a trip to Bangkok, where the headlines of The Bangkok Post and The Nation where reporting the latest international incident. The German government had impounded the Thai Crown Prince's plane in an attempt to force Thailand to finally pay more than € 30 million in damages and legal costs, which were awarded to Walter Bau, a now defunct German construction company, by an international arbitration panel in 2009. It seems that the Thai government had long been in breach of contract with Walter Bau, which had continued to pursue legal action long after its bankruptcy, and the German government saw fit to impound Crown Prince Maha Vajiralongkorn's plane.

Four Fours Puzzle

A friend of mine was discussing a shopping centre on nearby Orchard Road which is sometimes known as the "Four Floors". I misheard him and assumed he was talking about the famous mathematical puzzle "Four Fours" first posed by WW Rouse Ball in his 1892 publication "Mathematical Recreations and Essays".

The challenge is to find

Fun with Fees - Incidental Leverage

While helping a client design a fund performance fee model for a family office, I had to explain an interesting anomaly that can inflate a managers fees, common in most models but not well documented. Probably because it's quite subtle and something most people would rather not think about.

If an investor redeems shares that have increased in value, there will likely be some performance fee due. That portion of the fee essentially becomes "locked in" but stays in the fund until the variable dividend is paid out at the year end.

Origin of 2+20

According to my friend in the pub last night, the familiar "2+20" fee model of hedge funds can be traced back to over 3000 years to Phoenician boat captains.



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