Sat, Oct 1, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Academics find that each dollar of performance leads to disproportionately more dollars in future revenue

Thursday, March 21, 2013

Beverly Chandler, Opalesque London: Academics Jongha Lim from the University of Missouri, Berk A. Sensoy and Michael S. Weisbach from The Ohio State University have written a paper for the Charles A. Dice Center for Research in Financial Economics on Indirect Incentives of Hedge Fund Managers.

The authors set out to discover the size and effect of indirect performance incentives for hedge fund managers. Hedge fund managers are among the most highly paid individuals today, the authors write. "According to Kaplan and Rauh (2010), the top five hedge fund managers likely earned more than all 500 CEOs of S&P 500 firms in 2007. Therefore, the payoff to becoming a top hedge fund manager is enormous."

Investors invest with hedge funds based on their perception of the managers’ abilities, specifically the fund’s ability to achieve good performance. "Good performance, especially early in one’s career, increases a manager’s lifetime income not only through incentive fees earned at the time of the performance but also by increasing future flows of new investment to the fund, thereby increasing future fees" the paper says.

The academics posit that the extremely high level of pay for the top hedge fund managers suggests that the effect of current performance on lifetime income through future flows is likely to be important. "However, there are no estimates of its magnitude. For an incremental perc......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Opalesque Exclusive: BlackRock taps Artivest for alternative investment platform partnership[more]

    Bailey McCann, Opalesque New York: BlackRock will be working with New York-based Artivest to provide a platform for broader distribution of BlackRock alternatives funds. Artivest is a technology-driven alternative investment platform that also offers brokerage services. BlackRock has approximatel

  2. Eden Rock buys Gottex stake in ERG Asset Management[more]

    Matthias Knab, Opalesque: Eden Rock Group announced the purchase of Gottex’s stake in ERG Asset Management and so the firm is now wholly owned by Eden Rock. The two firms established the joint venture in 2011 to focus on providing cost effective solutions to funds holding illiquid investments, as

  3. "Hedge fund industry needs to shrink"[more]

    Komfie Manalo, Opalesque Asia: Writing for CNBC, Josh Brown, creator of The Reformed Broker blog and financial advisor for Ritholtz We

  4. Strategy - Voyager Management wants to invest in smaller hedge funds[more]

    From Valuewalk.com: Voyager Management, a $475 million fund of funds, is looking to downsize the hedge fund’s in which they invest, looking for smaller funds with assets under management that enable the fund to be nimble. The fund is looking for noncorrelation and will consider long / short equity

  5. Asia - Quant hedge funds are China's hot new export, Europe banks return to Korean brokerage market; target debt, alternative products[more]

    Quant hedge funds are China's hot new export From Bloomberg.com: Add China’s quant shops to the list of hedge funds branching out across Asian markets. Quantitative money managers from the world’s second-largest economy are opening offshore funds at a never-before-seen pace, according to