Role of managerial incentives and discretion in hedge fund performance

Arbeitspapier

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 performance. The incentive fee percentage rate by itself does not explain performance. We also find that funds with a higher degree of managerial discretion, proxied by longer lockup, notice, and redemption periods, deliver superior performance. These results are robust to using alternative performance measures and controlling for different data-related biases.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFR Working Paper ; No. 04-04

Classification and Topics

• Classification: Wirtschaft

Contributors, Location and Time

• Event: Geistige Schöpfung
• (who): Agarwal, Vikas ; Daniel, Naveen D. ; Naik, Narayan Y.
• Event: Veröffentlichung
• (who): University of Cologne, Centre for Financial Research (CFR)
• (where): Cologne
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/57754
• Last update: 08.01.2024, 2:35 PM CET