The Role of Remuneration Structures in Hedge Fund Performance
| Résumé |
In this paper, we rationalize the persistent abnormal performance of
hedge funds. We show how the commitment to deliver an absolute
return, the decreasing returns to scale to which hedge fund
strategies are subject, and the performance-linked compensation
combine with the income maximizing behavior of managers to
effectively align the interests of investors and managers. Thanks
to the coexistence of these elements, managers have an incentive to
control the size of the funds. Therefore, performance-diluting flows
do not occur and abnormal performance persists. The model can
quantitatively reproduce many empirical facts about hedge funds. |
| Mots-clés |
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| Citation | Guidotti, I. (2013). The Role of Remuneration Structures in Hedge Fund Performance. |
| Type | Working paper (Anglais) |
| Année | 2013 |
| URL | http://ssrn.com/abstract=2138860 |