Impact of Manager Compensation on Portfolio Risk and Return

Posted: 16 Oct 2007 Last revised: 27 May 2015

Date Written: October 11, 2007

Abstract

This paper takes an investor's view on the problem of delegating asset management authority to a manager. We study the implications of a typical hedge fund contract when the manager is allowed to adjust the activeness of the portfolio dynamically over time in a setting similar to Carpenter (2000). We find that taking managerial compensation into the analysis can have considerable consequences for the probability distribution of assets.

Keywords: hedge funds, compensation, portfolio risk, asset management

JEL Classification: G11, G12, M52, J33

Suggested Citation

Gupta, Pranay and Skallsjö, Sven R., Impact of Manager Compensation on Portfolio Risk and Return (October 11, 2007). Available at SSRN: https://ssrn.com/abstract=1021175 or http://dx.doi.org/10.2139/ssrn.1021175

Pranay Gupta (Contact Author)

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Sven R. Skallsjö

Independent ( email )

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