Case ID: KEL325
Solution ID: 9166
Words: 1808
Price $ 75

Extraordinary Value Partners LLC

Case Solution

Extra ordinary Value Partners LLP was created by Weina Hedge along with a partner Minnie Kahn. EVP mostly invested in small, privately management and unknown companies that had the potential for growing into large profitable companies in the future. EVP offered two classes of the investment vehicles, the long only fund and the short-long fund. Over a period of last five years, the long only fund had proved much more profitable than the long-short fund. Both of these funds also outperformed the Russell Microcap Index consistently throughout the investment period. Owing to this phenomenal success of the EVP, Richard Parker, the Chief Investment Officer of the SUN CAHRITIES decided to investment $10 million out of $100 million fund into EVP. However, he was confused as to which fund was more suitable and if the microcap index was a better option than the two funds. For this purpose, he needed to perform a number of statistical techniques to the historical return data of two funds and the indices.

Excel Calculations

·         Benchmarks

·         EVP Returns

·         Mean

·         Standard Deviatons

·         SR (Monthly)

·         Beta

·         Alpha

·         Correlation with the Microcap Index

·         Correlation with S&P 500 Index

·         Correlation with MSCI EAFE Index

·         Long-Short Fund             

·         Long Only Fund                                

·         Portfolio 1          

·         Portfolio 2          

·         Long-Short Fund return in excess of the Index  

·         Long Only Fund return in excess of the Index

Questions Covered

1.       What were the properties of EVP’s Historical Returns, and how did the Russell microcap index compare?

2.       Consider the returns of the EVP funds in excess of the microcap benchmark. What were the properties of that excess return?

3.       Was EVP truly a microcap stock picking fund? Use Return Based style analysis to answer this question.

4.       Within the microcap universe, did EVP focus on value or growth stocks?

5.       Was EVP just a leveraged version of the microcap benchmark, or some other indexes available to you?

6.       What was the style of the EVP fund returns? Did this analysis give any insight into as to how EVP added value relative to microcap benchmark?

7.       Suppose the historical returns represented what one could expect going forward. How would a 90% in M plus 10 percent in EVP long only fund compare with 90% in M plus 10% in a Russell Microcap Index Fund?