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The Performance of Hedge Fund Performance Fees / Itzhak Ben-David, Justin Birru, Andrea Rossi.
- Format:
- Book
- Author/Creator:
- Ben-David, Itzhak.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w27454.
- NBER working paper series no. w27454
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2020.
- Summary:
- We study the long-run outcomes associated with hedge funds' compensation structure. Over a 22-year period, the aggregate effective incentive fee rate is 2.5 times the average contractual rate (i.e., around 50% instead of 20%). Overall, investors collected 36 cents for every dollar earned on their invested capital (over a risk-free hurdle rate and before adjusting for any risk). In the cross-section of funds, there is a substantial disconnect between lifetime performance and incentive fees earned. These poor outcomes stem from the asymmetry of the performance contract, investors' return-chasing behavior, and underwater fund closures.
- Notes:
- Print version record
- June 2020.
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