Equitable Performance Fees for Hedge Funds
Publication Type
Book Chapter
Publication Date
2003
Abstract
Hedge funds are collective investment vehicles fast becoming popular with high net worth individuals as well as institutional investors. Given an incentive structure that involves fees based on performance, this paper proposes a structure and "equalization" process that is both equitable and transparent to investors. The structure involves the use of multi-portfolios giving any fund a structure similar to that of a partnership organization. The "equalization" process is demonstrated using stylized examples that illustrate the equalization procedures and computations. We believe that the approach improves on current methods and meets the objectives of equity and transparency, thus improving the incentive compatibility between the fund manager and investors.
Discipline
Finance and Financial Management
Research Areas
Quantitative Finance
Publication
Hedge Funds: Strategies, Risk Assessment, and Returns
Editor
Gregoriou, Greg N.; Karavas, Vassilios N.; Rouah, Fabrice
First Page
345
Last Page
364
ISBN
9781587982033
Identifier
10.2139/ssrn.340900
Publisher
Beard Books
City or Country
Washington, DC
Citation
LEE, David K. C.; LWI, Steven; and PHOON, Kok Fai.
Equitable Performance Fees for Hedge Funds. (2003). Hedge Funds: Strategies, Risk Assessment, and Returns. 345-364.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/3401
Additional URL
https://worldcat.org/isbn/9781587982033