An Equitable Structure for Hedge Fund Incentive Fees

An Equitable Structure for Hedge Fund Incentive Fees

There are a variety of problems in fee structures between hedge fund managers and their clients. Examples here illustrate issues such as the free rider problem and the “claw-back” syndrome that can arise in fee contracts. A different “equalization” process that is both equitable and transparent to i...

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Bibliographic Details
Main Authors: LEE, David K. C., LWI, Steven, PHOON, Kok Fai
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2004
Subjects:
Performance Fee
Equalisation
Hedge Funds
Free-rider
Clawback
Alernative Investment
Multi-porfolio Approach
Finance and Financial Management
Online Access:https://ink.library.smu.edu.sg/lkcsb_research/3362
https://doi.org/10.3905/joi.2004.434549
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Institution: Singapore Management University
Language: English
Description
Summary:There are a variety of problems in fee structures between hedge fund managers and their clients. Examples here illustrate issues such as the free rider problem and the “claw-back” syndrome that can arise in fee contracts. A different “equalization” process that is both equitable and transparent to investors would involve multiportfolios that give any fund a structure similar to that of a partnership organization, and overcomes the current drawbacks in contracts. Application of this structure should improve fund manager and investor compatibility.

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