RT Journal Article SR Electronic T1 Performance Sharing in Risky Portfolios: The Case of Hedge Fund Returns and Fees JF The Journal of Portfolio Management FD Institutional Investor Journals SP 105 OP 118 DO 10.3905/jpm.2019.45.4.105 VO 45 IS 4 A1 Georges Hübner A1 Marie Lambert YR 2019 UL https://pm-research.com/content/45/4/105.abstract 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