Publication Type

Journal Article

Version

Publisher’s Version

Publication Date

4-2011

Abstract

Do fund incentives, volatility exposure, and liquidity risk affect fund performance? We show that hedge funds with high performance fees and high water mark provisions tend to outperform those with low performance fees and no high water marks. Moreover, funds that short volatility and embrace liquidity risk deliver significantly higher returns relative to funds that long volatility and eschew liquidity risk. Investors with access to secure capital and managed account platforms may be positioned to take advantage of these performance differences.

Keywords

Hedge funds, performance

Discipline

Finance and Financial Management

Publication

Hedge Fund Insights

First Page

2-8

Publisher

BNP Paribus Hedge Fund Centre, Singapore Management University

City or Country

Singapore

Copyright Owner and License

BNP Paribus Hedge Fund Centre, Singapore Management University

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