Cafa et al,No one would invest with MK for a 2.25% return and if...

Cafa et al,

No one would invest with MK for a 2.25% return and if fees are 1 and 20 (1% funds under management and 20% of gross returns) even less so. I would say that if MK cannot show double digit performance they would find marketing their fund difficult.

Yes, if MK have short sold to hedge they will be sitting on unrealised returns. But on the other side the asset (the convertible notes) would have fallen in value based on almost all the intrinsic optionality in the conversion strike being zero (although still plenty of time value). Also, they would have to acknowledge that in bond parlance, getting their principle back on maturity at this point is less certain then when they initially invested, which further impacts the value of the notes.

I question whether MK would or could borrow unless the were secured against assets.

Not saying MK are mugs, far from it. Just that as things stand, this investment for them would be pretty ordinary, they have limited ability to do anything about it and in fact might actually be cause for concern when they present to their investors.

I guess all will be revealed shortly.

K