Evaluating Hedge Fund Valuation Techniques

An investment firm is currently evaluating a potential investment in a hedge fund that utilizes a long/short equity strategy. The fund manager has presented several valuation techniques that could be used to assess this hedge fund's potential performance. Understanding the nuances between these techniques is crucial for making an informed investment decision.

Which of the following valuation techniques is most commonly applied to hedge funds to evaluate their expected returns, particularly in the context of their long/short equity strategy?