Incentive Contracts and Hedge Fund Management

Topics:
Investment and Capital Markets
Tags:
Finance,
Financial Services,
Hedge Fund,
Incentive,
Investment,
Sales,
Sales Force Management,
University Of Oregon
Source:
University of Oregon

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Overview: This paper investigates dynamically optimal risk-taking by an expected-utility maximizing manager of a hedge fund. The paper examines the effects of variations on a compensation structure that includes a percentage management fee, a performance incentive for exceeding a specified high water mark, and managerial ownership of fund shares. The paper also considers extensions where the manager can voluntarily choose to shut down the fund as well as to enhance the fund's Sharpe Ratio through additional effort.

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Format: PDF | Size: 450KB | Date: May 2004 | Pages: 42

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