High-Water Marks and Hedge Fund Management Contracts

Preprint
Publisher Website
Google Scholar
    • preprint
      • Published in RePEc
Abstract
Incentive or performance fees for money managers are frequently accompanied by high-water mark provisions which condition the payment of the performance fee upon exceeding the maximum achieved share value. In this paper, we show that hedge fund performance fees are valuable to money managers, and conversely represent a claim on a significant proportion of investor wealth. The high-water mark provisions in these contracts limit the value of the performance fees. We provide a closed-form solution to the high-water mark
All Related Versions

This publication has 0 references indexed in Scilit: