Hi Portfolio - good to read yours and @Transversal ‘s discussion...

Hi Portfolio - good to read yours and @Transversal ‘s discussion above.

Re your question ... with fund 1 I have no crystal ball to predict return. IMO that fund is a dogs breakfast to model given its structure. In addition to your analysis above tho, I’d add that OBL (as IMF Bentham) sold it’s balance sheet US portfolio to the fund and took some profits that way as well. I haven’t got my head around how that’s affected Fund 1 ROIC or what OBL has really made across the fund. Happy to hear your thoughts if you can make head or tail of it.

Re my comment about easier in future is about Fund 4/5 model T&C’s being replicated in the future and Fund 1/2/3 models being completed (replaced by new Fund 4/5 type models).

Fund 4/5 models benefit from steady, management fees of ~2% paid each qrt no matter what the profitability of the fund is (versus management fees paid way down the waterfall for Funds 1/2/3). Funds 4/5 also benefit from lower hurdle rates of 8% and revenue generated as individual investments are completed (both as return on OBL’s capital and its performance fees). If a fund is in “catchup” it’ll be clear that any performance fees will be reduced (akin to say Magellan being below the high tide mark for one of its funds). This is why over time, IMO, OBL’s revenue and profitability will become easier to forecast.

Re yours and @@Transversal conversations on cost of funding vs on balance sheet at lower % by others ... IMO the structure/cost of funds 4/5 looks very competitive to me, 8% hurdle and OBL takes a 2% management fee before investors receive anything and with no risk to its own balance sheet vs say 6% and full balance sheet risk of others Have you guys thought about funding net of the management fees for these funds?

Cheers, Simon