The Dynamics of Hedge Fund Fees

Deuskar, P and Wang, Z J and Wu, Y and Nguyen, Q H (2013) The Dynamics of Hedge Fund Fees. Working Paper. SSRN. (Unpublished)

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Abstract

In contrast to the perception of a common 2/20 fee structure, we find considerable cross-sectional and time series variations in hedge fund fees using a large panel data set. Fund family characteristics and prior performance play an important role in fee determination. New fund families are likely to charge at- or above-median fees. Initial fees of funds introduced by an existing family are positively related to the prior performance of the family as well as of the investment strategy they follow. Furthermore, management fees are dynamically adjusted in response to past fund performance. Funds that increase management fee more aggressively experience a bigger drop in subsequent money inflows, and are more likely to maintain their good performance. This suggests that fee increases, which typically apply only to new investors, may benefit existing investors by mitigating diseconomies of scale.

Affiliation: Indian School of Business
ISB Creiators:
ISB Creators
ORCiD
Deuskar, P
UNSPECIFIED
Item Type: Monograph (Working Paper)
Uncontrolled Keywords: Hedge funds, Fees, Incentives
Subjects: Finance
Depositing User: Ilayaraja M
Date Deposited: 19 May 2019 14:29
Last Modified: 19 May 2019 14:29
URI: http://eprints.exchange.isb.edu/id/eprint/1020
Publisher URL: http://dx.doi.org/10.2139/ssrn.1659275
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