Money for Nothing? Understanding Variation in Reported Hedge Fund Fees

49 Pages Posted: 31 Mar 2011 Last revised: 17 Oct 2012

Tarun Ramadorai

Imperial College London; Centre for Economic Policy Research (CEPR)

Michael Streatfield

University of Oxford - Said Business School; Oxford-Man Institute of Quantitative Finance

Date Written: March 28, 2011

Abstract

We analyze the determinants of hedge fund management and incentive fees in a large consolidated hedge fund dataset. We detect time-series variation in fees by concentrating our attention on fund launches, and conditioning fees at launch on fund family characteristics. Larger and better performing fund families launch high fee funds. Funds with high management fees at launch do not perform any differently from low management fee funds, though funds with high incentive fees marginally outperform. Our results are robust to the use of an interval regression technique to uncover the underlying continuous distribution of fees from the discrete reported fees.

Keywords: hedge funds, fees, performance, management company, fund family

JEL Classification: D40, G20, G23

Suggested Citation

Ramadorai, Tarun and Streatfield, Michael, Money for Nothing? Understanding Variation in Reported Hedge Fund Fees (March 28, 2011). Paris December 2012 Finance Meeting EUROFIDAI-AFFI Paper. Available at SSRN: https://ssrn.com/abstract=1798628 or http://dx.doi.org/10.2139/ssrn.1798628

Tarun Ramadorai (Contact Author)

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

HOME PAGE: http://www.tarunramadorai.com

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Michael Streatfield

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Oxford-Man Institute of Quantitative Finance

Eagle House
Walton Well Road
Oxford, Oxfordshire OX2 6ED
United Kingdom

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