Managerial Incentives and the Risk-Taking Behavior of Hedge Fund Managers

Indirect Incentives of Hedge Fund Managers

Indirect incentives exist in the money management industry when good current performance increases future inflows of new capital, leading to higher future fees. We quantify the magnitude of indirect performance incentives for hedge fund managers. Flows respond quickly and strongly to performance; lagged performance has a monotonically decreasing impact on flows as lags increase up to two years....

Role of managerial incentives and discretion in hedge fund performance VIKAS AGARWAL , NAVEEN

Using a comprehensive hedge fund database, we examine the role of managerial incentives and discretion in hedge fund performance. Hedge funds with greater managerial incentives, proxied by the delta of the option-like incentive fee contracts, higher levels of managerial ownership, and the inclusion of high-water mark provisions in the incentive contracts, are associated with superior performanc...

The Alpha in Fund of Hedge Funds Do Fund of Hedge Funds Managers Add Value?

All hedge funds are not created equal. A poorly chosen portfolio of hedge funds can produce disappointing results. All fund of funds managers are not created equal, either. A poor choice of fund of funds managers can yield disappointing results. This article is designed to outline the value proposition of a fund of hedge funds operation. We conclude that fund of funds add value primarily throug...

Fund Flows, Performance, Managerial Career Concerns, and Risk Taking

We develop a framework in which we simultaneously model the interactions among investors, fund companies (represented by fund advisors), and managers. In this framework, we show that the interplay between a manager's incentives arising from her compensation structure and career concerns leads to a non-monotonic (approximately U-shaped) relation between her risk choices and prior performance rel...

Appendix for “ Managerial risk - taking incentives and corporate pension policy ”