On the Valuation of Performance Fees and Their Impact on Asset Managers’ Incentives

IF 0.4 Q4 BUSINESS, FINANCE
Wei Dai, R. C. Merton, Savina Rizova
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引用次数: 1

Abstract

This article provides a robust and practical framework for assessing performance fees. The fee valuation uses standard option pricing models and therefore does not require any expected return or alpha estimate. These features make the framework easy to use, robust, and widely applicable to a variety of fee structures in practice. The authors discuss the incentive impact of performance fees and caution against the unintended consequences for manager behaviors. These implications are especially relevant today, as systematic investing is on the rise and asset owners are increasingly interested in the adoption of performance fees across a broader range of investment styles. TOPICS: Derivatives, options, manager selection, performance measurement Key Findings ▪ This article provides a practical framework for assessing performance fees based on standard option pricing models. The fee valuation does not require any expected return or alpha estimate, making this framework transparent, robust, and widely applicable. ▪ Using the framework, the authors show the incentive impact of performance fees and caution against the unintended consequences for manager behaviors. ▪ The article discusses the implications of performance fees in the context of systematic investing. This discussion is especially relevant today as asset owners are increasingly interested in the broader adoption of performance fee structures beyond traditional alternative investments.
绩效费用的评估及其对资产管理者激励的影响
本文为评估绩效费用提供了一个稳健而实用的框架。费用估值使用标准期权定价模型,因此不需要任何预期回报或阿尔法估计。这些特性使该框架易于使用、健壮,并在实践中广泛适用于各种费用结构。作者讨论了绩效费的激励影响,并对管理者行为的意外后果提出了警告。这些影响在今天尤其重要,因为系统投资正在兴起,资产所有者对在更广泛的投资风格中采用绩效费越来越感兴趣。主题:衍生品、期权、经理选择、绩效衡量关键发现▪ 本文提供了一个基于标准期权定价模型评估绩效费用的实用框架。费用估值不需要任何预期回报或阿尔法估计,使该框架透明、稳健且广泛适用。▪ 利用该框架,作者展示了绩效费的激励影响,并对管理者行为的意外后果提出了警告。▪ 本文讨论了系统投资背景下绩效费的含义。这一讨论在今天尤其重要,因为资产所有者对在传统替代投资之外更广泛地采用绩效费结构越来越感兴趣。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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来源期刊
CiteScore
1.50
自引率
14.30%
发文量
40
期刊介绍: The Journal of Alternative Investments (JAI) provides you with cutting-edge research and expert analysis on managing investments in hedge funds, private equity, distressed debt, commodities and futures, energy, funds of funds, and other nontraditional assets. JAI is the official publication of the Chartered Alternative Investment Analyst Association (CAIA®). JAI provides you with challenging ideas and practical tools to: •Profit from the growth of hedge funds and alternatives •Determine the optimal mix of traditional and alternative investments •Measure and track portfolio performance •Manage your alternative investment portfolio with proven risk management practices
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