Hedge fund incentives, management commitment and survivorship

Judy Qiu, Leilei Tang, Ingo Walter

Research output: Contribution to journalArticle

Abstract

Management ownership in hedge funds sends conflicting signals—signals which reduce investors’ perception of survivorship risk. We document that decisions on management ownership are purposely self-selected. Such decisions are most likely motivated by unique incentive mechanisms imbedded in hedge funds. We examine the impact of managerial ownership decisions on fund survivorship risk by accounting for unobserved fund manager motivations that affect both ownership decisions and survivorship risk. Our findings suggest that the conventional argument that having management commitment can reduce survival risk (and therefore align the interests between managers and investors) is significantly overstated. These results are robust to using alternative ownership measures and controlling for different samples.
LanguageEnglish
Number of pages28
JournalFinancial Markets and Portfolio Management
Early online date8 May 2018
DOIs
Publication statusE-pub ahead of print - 8 May 2018

Fingerprint

Incentives
Management commitment
Hedge funds
Investors
Ownership
Management ownership
Managers
Incentive mechanism
Managerial ownership
Fund managers

Keywords

  • hedge fund incentive
  • endogeneity
  • management ownership
  • survivorship risk

Cite this

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abstract = "Management ownership in hedge funds sends conflicting signals—signals which reduce investors’ perception of survivorship risk. We document that decisions on management ownership are purposely self-selected. Such decisions are most likely motivated by unique incentive mechanisms imbedded in hedge funds. We examine the impact of managerial ownership decisions on fund survivorship risk by accounting for unobserved fund manager motivations that affect both ownership decisions and survivorship risk. Our findings suggest that the conventional argument that having management commitment can reduce survival risk (and therefore align the interests between managers and investors) is significantly overstated. These results are robust to using alternative ownership measures and controlling for different samples.",
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Hedge fund incentives, management commitment and survivorship. / Qiu, Judy; Tang, Leilei; Walter, Ingo.

In: Financial Markets and Portfolio Management, 08.05.2018.

Research output: Contribution to journalArticle

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