Tournament Behavior in Hedge Funds: High-water Marks, Fund Liquidation, and Managerial Stake

• 成果类型: Article
• 署名作者: Aragon, George O.; Nanda, Vikram
• 署名单位: Arizona State University; Arizona State University-Tempe; University System of Georgia; Georgia Institute of Technology
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhr111
• 发表日期: 2012
• 页码: 937
• 关键词: INCENTIVE FEES; performance; RISK; COMPENSATION; survival

摘要

We analyze whether risk shifting by a hedge fund manager is related to the manager's incentive contract, personal capital stake, and the risk of fund closure. We find that the propensity to increase risk following poor performance is significantly weaker when incentive pay is tied to the fund's high-water mark and when funds face little immediate risk of liquidation. Risk shifting is also less prevalent when a manager has a significant amount of personal capital invested in the fund. Overall, high-water mark provisions, managerial stake, and low risk of fund closure appear to make a hedge fund manager more conservative with regard to risk shifting.