Do Funds-of-Funds Deserve Their Fees-on-Fees?

The Economics of Hedge Funds : Alpha , Fees , Leverage , and Valuation ∗

Hedge fund managers charge management fees on assets under management (AUM) and incentive fees indexed to the high-water mark (HWM). We study the effects of fees and alpha on managerial dynamic leverage choice and valuation. Our main results are: (i) high-powered incentive fees encourage excessive risk taking, while management fees have the opposite effect; (ii) agency conflicts have significan...

User fees or equity funds in low-income countries.

The Impact of Check Sequencing on NSF (Not-Sufficient Funds) Fees

In a wave of litigation that has escalated into several class-action lawsuits, banks have been charged with sequencing checks unfairly to obtain higher fees for not-sufficient funds (NSF). The point of contention is the banks’ use of the high-low check-sequencing procedure, which presents checks for payment in descending dollar amounts. While it is likely that sequencing plays an important role...

Pricing of principal - protected funds in China : are the guarantee fees too high ?

This paper focuses on the pricing of guarantees for principal-protected funds under the constant proportion portfolio insurance (CPPI) strategy and investigates how the CPPI parameters may affect guarantee prices. In addition, it assesses the fairness of the guarantee fees charged to the current principal-protected funds in China. Our research indicates that some of the funds are charged higher...

Do Funds of Hedge Funds Add Value? Evidence from their holdings!!

We examine the value of fund of funds (FoFs) using a new database of the funds’ hedge fund holdings. This data allows a first ever look at the types of hedge funds that FoFs select, as well the ability to gauge the FoFs’ skill at hiring and firing hedge fund managers. We find that FoFs hire larger, younger, and more illiquid hedge funds that have positive past performance. FoFs select hedge fun...