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The Effects of Management and Provision Accounts on Hedge Fund Returns - Part I : The High Water Mark Scheme

Author

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  • Serge Darolles

    () (Université Paris-Dauphine et CREST)

  • Christian Gouriéroux

    () (CREST et Université de Toronto)

Abstract

A characteristic of hedge funds is not only an active portfolio management, but also the allocation of portfolio performance between different accounts, which are the accounts for the external investors and an account for the management firm, respectively. Despite a lack of transparency in hedge fund market, the strategy of performance allocation is publicly available. This paper shows that, for the High Water Mark Scheme, these complex performance allocation strategies might explain empirical facts observed in hedge fund returns, such as return persistence, skewed return distribution, bias ratio, or implied increasing risk appetite

Suggested Citation

  • Serge Darolles & Christian Gouriéroux, 2013. "The Effects of Management and Provision Accounts on Hedge Fund Returns - Part I : The High Water Mark Scheme," Working Papers 2013-22, Center for Research in Economics and Statistics.
  • Handle: RePEc:crs:wpaper:2013-22
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    References listed on IDEAS

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    Cited by:

    1. Serge Darolles & Christian Gouriéroux, 2013. "The Effects of Management and Provision Accounts on Hedge Fund Returns - Part II : The Loss Carry Forward Scheme," Working Papers 2013-23, Center for Research in Economics and Statistics.
    2. Serge Darolles & Patrick Gagliardini & Christian Gouriéroux, 2012. "Survival of Hedge Funds : Frailty vs Contagion," Working Papers 2012-36, Center for Research in Economics and Statistics.

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