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Document type:
Working Paper 
Escobar, M.; Havrylenko, Y.; Zagst, R. 
Optimal First-Loss Fee Structures in Hedge Funds 
Hedge fund managers compensated by first-loss fee structures charge a management fee and a performance fee as in the traditional scheme but they also guarantee to cover a certain amount of investors’ potential losses. Applying the expected utility framework, we compute the set of first-loss fee structures that are Pareto optimal for the manager and the investor. We find that the traditional scheme of a management fee of 2% and a performance fee of 20% is not Pareto optimal. First-loss fee structure...    »
Contracting organization:
Lehrstuhl für Finanzmathematik