PT  - JOURNAL ARTICLE
AU  - Georges Hübner
AU  - Marie Lambert
TI  - Performance Sharing in Risky Portfolios: <em>The Case of Hedge Fund Returns and Fees</em>
AID  - 10.3905/jpm.2019.45.4.105
DP  - 2019 Mar 31
TA  - The Journal of Portfolio Management
PG  - 105--118
VI  - 45
IP  - 4
4099  - https://pm-research.com/content/45/4/105.short
4100  - https://pm-research.com/content/45/4/105.full
AB  - Institutional investors face various leverage and short-sale restrictions that alter competition in the asset management industry. This distortion enables unconstrained investors with high volatility targets to extract additional income from constrained institutional investors. Using a sample of 1,938 long–short equity hedge funds spanning 15 years, the authors show that high-volatility funds charge higher fees and deliver lower net-of-fees Sharpe ratios than do their low-volatility peers. This evidence could be interpreted as a situational rent extraction or as a service compensation. Conversely, increased volatility could result from a manager’s ambition to deliver large net information ratios after accounting for a high fee structure.TOPICS: Real assets/alternative investments/private equity, analysis of individual factors/risk premia, legal/regulatory/public policy