Hedge Fund - market neutral L/S practice, investing, everyone, actually, capital

suxiaoxiao

Hi everyone

I encountered the small doubt while doing Vol 6 R73 example 7and practice exam 14 re Hedge funds investing in neutral long/short strategy

In example in R73 p 222 in Curric fund has $10M capital ($9M margin deposit at 18% margin it splits total capital of 9M/.18 = $50M into halfs 25M long 25M short)
and in practice exam R73/14 $25m-$1Mcash cushion implies 24M/.20=> $120M totalling where no split actualy occurs so goes to 120M long 120M short
I did actually as in second practice exam having not noticed that difference.

Question is why in first case splits into half occurs while in the other does not?
Did I miss sth?
thanks

sdada

In the example the hedge fund borrows 50mil in shares and shorts them, then uses the cash from the shortsale to buy the other 50mil in shares its long. Its the same in the problem too.