Tournament Behavior in Hedge Funds: High-water Marks, Fund Liquidation, and Managerial Stake
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&#...
Gespeichert in:
| Veröffentlicht in: | The Review of financial studies 2012-03, Vol.25 (3), p.937-974 |
|---|---|
| Hauptverfasser: | , |
| Format: | Artikel |
| Sprache: | eng |
| Schlagworte: | |
| Online-Zugang: | Volltext |
| Tags: |
Tag hinzufügen
Keine Tags, Fügen Sie den ersten Tag hinzu!
|
| container_end_page | 974 |
|---|---|
| container_issue | 3 |
| container_start_page | 937 |
| container_title | The Review of financial studies |
| container_volume | 25 |
| creator | Aragon, George O. Nanda, Vikram |
| description | 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. |
| doi_str_mv | 10.1093/rfs/hhr111 |
| format | Article |
| fullrecord | <record><control><sourceid>jstor_proqu</sourceid><recordid>TN_cdi_proquest_miscellaneous_1031279646</recordid><sourceformat>XML</sourceformat><sourcesystem>PC</sourcesystem><jstor_id>41407851</jstor_id><oup_id>10.1093/rfs/hhr111</oup_id><sourcerecordid>41407851</sourcerecordid><originalsourceid>FETCH-LOGICAL-c376t-7c8a2294fdf9cbd3877562b458b7e0478d6d43ba22d3e9bed82ffe43d7d57a0b3</originalsourceid><addsrcrecordid>eNp90EFLwzAUwPEgCs7pxbsQBEFkdUmTNok3Hc4JGx6cN6GkTbpm65otaRW_vd0qHjx4evDej3f4A3CO0S1Gggxd7odF4TDGB6CHaRwFjMT8EPQQFyQQNKLH4MT7JUIIE4p64H1uG1fJta5q-KAL-WGsg6aCE60WGo6bSvk7ODGLIviUtXZwJt3KD_YHODXbxihZG1sNoGwXM1nJhXZGlvC1lit9Co5yWXp99jP74G38OB9NgunL0_PofhpkhMV1wDIuw1DQXOUiSxXhjEVxmNKIp0wjyriKFSVpaxTRItWKh3muKVFMRUyilPTBdfd34-y20b5O1sZnuixlpW3jE4wIDpmIadzSyz90uQ9Q-kSELOI0Ejt006HMWe-dzpONM2vpvtpPya5z0nZOus4tvuqwbTb_u4vOLX1t3a-kmCLGI0y-AfMChwA</addsrcrecordid><sourcetype>Aggregation Database</sourcetype><iscdi>true</iscdi><recordtype>article</recordtype><pqid>927584596</pqid></control><display><type>article</type><title>Tournament Behavior in Hedge Funds: High-water Marks, Fund Liquidation, and Managerial Stake</title><source>Business Source Complete</source><source>JSTOR Archive Collection A-Z Listing</source><source>Oxford University Press Journals All Titles (1996-Current)</source><creator>Aragon, George O. ; Nanda, Vikram</creator><creatorcontrib>Aragon, George O. ; Nanda, Vikram</creatorcontrib><description>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.</description><identifier>ISSN: 0893-9454</identifier><identifier>EISSN: 1465-7368</identifier><identifier>DOI: 10.1093/rfs/hhr111</identifier><language>eng</language><publisher>Oxford: Oxford University Press</publisher><subject>Asset management ; Capital investments ; Capital management ; Compensation ; Equity ; Fees ; Financial incentives ; Financial performance ; Financial risks ; Hedge funds ; Hedging ; Investment advisors ; Investment strategies ; Investors ; Liquidation ; Managers ; Portfolio management ; Risk ; Risk aversion ; Risk management ; Studies ; Tournament behaviour</subject><ispartof>The Review of financial studies, 2012-03, Vol.25 (3), p.937-974</ispartof><rights>Copyright © 2012 The Society for Financial Studies</rights><rights>The Author 2011. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com. 2012</rights><rights>Copyright Oxford Publishing Limited(England) Mar 2012</rights><lds50>peer_reviewed</lds50><woscitedreferencessubscribed>false</woscitedreferencessubscribed><citedby>FETCH-LOGICAL-c376t-7c8a2294fdf9cbd3877562b458b7e0478d6d43ba22d3e9bed82ffe43d7d57a0b3</citedby><cites>FETCH-LOGICAL-c376t-7c8a2294fdf9cbd3877562b458b7e0478d6d43ba22d3e9bed82ffe43d7d57a0b3</cites></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><linktopdf>$$Uhttps://www.jstor.org/stable/pdf/41407851$$EPDF$$P50$$Gjstor$$H</linktopdf><linktohtml>$$Uhttps://www.jstor.org/stable/41407851$$EHTML$$P50$$Gjstor$$H</linktohtml><link.rule.ids>314,780,784,803,1584,27924,27925,58017,58250</link.rule.ids></links><search><creatorcontrib>Aragon, George O.</creatorcontrib><creatorcontrib>Nanda, Vikram</creatorcontrib><title>Tournament Behavior in Hedge Funds: High-water Marks, Fund Liquidation, and Managerial Stake</title><title>The Review of financial studies</title><description>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.</description><subject>Asset management</subject><subject>Capital investments</subject><subject>Capital management</subject><subject>Compensation</subject><subject>Equity</subject><subject>Fees</subject><subject>Financial incentives</subject><subject>Financial performance</subject><subject>Financial risks</subject><subject>Hedge funds</subject><subject>Hedging</subject><subject>Investment advisors</subject><subject>Investment strategies</subject><subject>Investors</subject><subject>Liquidation</subject><subject>Managers</subject><subject>Portfolio management</subject><subject>Risk</subject><subject>Risk aversion</subject><subject>Risk management</subject><subject>Studies</subject><subject>Tournament behaviour</subject><issn>0893-9454</issn><issn>1465-7368</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2012</creationdate><recordtype>article</recordtype><recordid>eNp90EFLwzAUwPEgCs7pxbsQBEFkdUmTNok3Hc4JGx6cN6GkTbpm65otaRW_vd0qHjx4evDej3f4A3CO0S1Gggxd7odF4TDGB6CHaRwFjMT8EPQQFyQQNKLH4MT7JUIIE4p64H1uG1fJta5q-KAL-WGsg6aCE60WGo6bSvk7ODGLIviUtXZwJt3KD_YHODXbxihZG1sNoGwXM1nJhXZGlvC1lit9Co5yWXp99jP74G38OB9NgunL0_PofhpkhMV1wDIuw1DQXOUiSxXhjEVxmNKIp0wjyriKFSVpaxTRItWKh3muKVFMRUyilPTBdfd34-y20b5O1sZnuixlpW3jE4wIDpmIadzSyz90uQ9Q-kSELOI0Ejt006HMWe-dzpONM2vpvtpPya5z0nZOus4tvuqwbTb_u4vOLX1t3a-kmCLGI0y-AfMChwA</recordid><startdate>20120301</startdate><enddate>20120301</enddate><creator>Aragon, George O.</creator><creator>Nanda, Vikram</creator><general>Oxford University Press</general><general>Oxford Publishing Limited (England)</general><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>20120301</creationdate><title>Tournament Behavior in Hedge Funds: High-water Marks, Fund Liquidation, and Managerial Stake</title><author>Aragon, George O. ; Nanda, Vikram</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c376t-7c8a2294fdf9cbd3877562b458b7e0478d6d43ba22d3e9bed82ffe43d7d57a0b3</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2012</creationdate><topic>Asset management</topic><topic>Capital investments</topic><topic>Capital management</topic><topic>Compensation</topic><topic>Equity</topic><topic>Fees</topic><topic>Financial incentives</topic><topic>Financial performance</topic><topic>Financial risks</topic><topic>Hedge funds</topic><topic>Hedging</topic><topic>Investment advisors</topic><topic>Investment strategies</topic><topic>Investors</topic><topic>Liquidation</topic><topic>Managers</topic><topic>Portfolio management</topic><topic>Risk</topic><topic>Risk aversion</topic><topic>Risk management</topic><topic>Studies</topic><topic>Tournament behaviour</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Aragon, George O.</creatorcontrib><creatorcontrib>Nanda, Vikram</creatorcontrib><collection>CrossRef</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>The Review of financial studies</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Aragon, George O.</au><au>Nanda, Vikram</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Tournament Behavior in Hedge Funds: High-water Marks, Fund Liquidation, and Managerial Stake</atitle><jtitle>The Review of financial studies</jtitle><date>2012-03-01</date><risdate>2012</risdate><volume>25</volume><issue>3</issue><spage>937</spage><epage>974</epage><pages>937-974</pages><issn>0893-9454</issn><eissn>1465-7368</eissn><abstract>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.</abstract><cop>Oxford</cop><pub>Oxford University Press</pub><doi>10.1093/rfs/hhr111</doi><tpages>38</tpages></addata></record> |
| fulltext | fulltext |
| identifier | ISSN: 0893-9454 |
| ispartof | The Review of financial studies, 2012-03, Vol.25 (3), p.937-974 |
| issn | 0893-9454 1465-7368 |
| language | eng |
| recordid | cdi_proquest_miscellaneous_1031279646 |
| source | Business Source Complete; JSTOR Archive Collection A-Z Listing; Oxford University Press Journals All Titles (1996-Current) |
| subjects | Asset management Capital investments Capital management Compensation Equity Fees Financial incentives Financial performance Financial risks Hedge funds Hedging Investment advisors Investment strategies Investors Liquidation Managers Portfolio management Risk Risk aversion Risk management Studies Tournament behaviour |
| title | Tournament Behavior in Hedge Funds: High-water Marks, Fund Liquidation, and Managerial Stake |
| url | https://sfx.bib-bvb.de/sfx_tum?ctx_ver=Z39.88-2004&ctx_enc=info:ofi/enc:UTF-8&ctx_tim=2025-01-06T15%3A11%3A05IST&url_ver=Z39.88-2004&url_ctx_fmt=infofi/fmt:kev:mtx:ctx&rfr_id=info:sid/primo.exlibrisgroup.com:primo3-Article-jstor_proqu&rft_val_fmt=info:ofi/fmt:kev:mtx:journal&rft.genre=article&rft.atitle=Tournament%20Behavior%20in%20Hedge%20Funds:%20High-water%20Marks,%20Fund%20Liquidation,%20and%20Managerial%20Stake&rft.jtitle=The%20Review%20of%20financial%20studies&rft.au=Aragon,%20George%20O.&rft.date=2012-03-01&rft.volume=25&rft.issue=3&rft.spage=937&rft.epage=974&rft.pages=937-974&rft.issn=0893-9454&rft.eissn=1465-7368&rft_id=info:doi/10.1093/rfs/hhr111&rft_dat=%3Cjstor_proqu%3E41407851%3C/jstor_proqu%3E%3Curl%3E%3C/url%3E&disable_directlink=true&sfx.directlink=off&sfx.report_link=0&rft_id=info:oai/&rft_pqid=927584596&rft_id=info:pmid/&rft_jstor_id=41407851&rft_oup_id=10.1093/rfs/hhr111&rfr_iscdi=true |