Performance related compensation factors in the activity of global hedge funds
Performance related compensation factors in the activity of global hedge funds

Summary/Abstract: Performance related compensation (skewed toward the attainment of predefined target rates) is a critical incentive attracting and retaining talent by the hedge fund industry. The hedge fund community is still recovering from the recent global and regional crises that have put hedge fund managers’ skills to a veritable test of ingenuity and endurance. Hedge funds’ basic emoluments did not substantially deviate from those of other forms of institutional investment where compensation mechanisms are more conservative. Prolonged failure to reap performance related benefits is likely to alter the business philosophies and allocation policies of most hedge funds, especially in light of mounting operating and competitive pressures. In particular, scale related factors might stifle innovation embodied by hedge fund startups.

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