Sun, Jun 26, 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 Roundup: Hedge funds shrink as liquidations outpace new launches in Q1: hedge fund news, week 27[more]

    In the week ending 17 May, 2016, HFR said hedge fund liquidations declined narrowly to begin 2016 after rising sharply to conclude 2015, as investors positioned f

  2. Europe - Hedge funds keep powder dry over big Brexit bets, Hedge funds sense profit in Europe shock waves after Brexit vote, Soros warns Brexit may cause pound plunge worse than Black Wednesday, After Brexit: What will happen if Britain votes to leave the UK?[more]

    Hedge funds keep powder dry over big Brexit bets From FT.com: Hedge funds are shying away from big bets on Brexit, with many unwilling to risk further losses having already suffered a painful first half of the year. With the outcome of a UK vote on the country’s membership of the Europea

  3. News Briefs - ’Flash Boys’ get green light to launch stock exchange, Pimco says ‘storm is brewing’ in U.S. commercial real estate, Bankers get ready to rumble at Hedge Fund Fight Night, AIMA Australia celebrates 15th anniversary[more]

    ’Flash Boys’ get green light to launch stock exchange In an investing environment ruled by fast, the newest U.S. public stock exchange is banking on slow. Well, slower. IEX Group, which won Securities and Exchange Commission approval on Friday to go head-to-head with the New York Stock E

  4. Blackstone buys minority stake in New York-based credit hedge fund Marathon[more]

    Benedicte Gravrand, Opalesque Geneva: Blackstone Strategic Capital Holdings Fund, a vehicle managed by Blackstone Alternative Asset Management (BAAM), has acquired a passive, minority interest in Marathon Asset Management, for an undisclosed sum. Based in New York,

  5. Visium hedge fund manager Sanjay Valvani found dead[more]

    Benedicte Gravrand, Opalesque London: A hedge fund manager connected with an insider trading case has apparently committed suicide. Sanjay Valvani, 44, a hedge fund manager at New York-based Visium Asset Management, was found dead in an apparent suicide on 21 June in his Brooklyn residence,