skip to primary navigationskip to content
 

CF Weekly Workshop - The Incentives of Performance Fees, High-Water Marks and Personal Stakes by Moritz Dumbjen

When May 15, 2012
from 05:00 PM to 06:00 PM
Where Sidgwick Hall, Newnham College
Contact Name
Add event to calendar vCal
iCal

The Incentives of Performance Fees, High-Water Marks and Personal Stakes

Abstract:

In this paper we present a mathematical framework for the optimal investment problem of a fund manager who gets paid a performance fee and a management fee from his investors. Through the equivalence to an optimal stopping problem, we find a simple characterisation of the solution and an early indicator that performance fees provide precarious incentives. We then incorporate more detailed specifications of the fee structure. The effects of a high-water mark, a hurdle rate or a manager's personal stake can all be demonstrated elegantly. Finally, we increase the complexity of our model by relaxing the conditions on the underlying assets and allowing for investors to enter and leave the fund over time, according to its performance. Our framework still allows for an illustrative characterisation of the manager's incentivisation in this case and we turn to numerical methods to demonstrate concrete examples.

« April 2017 »
April
MoTuWeThFrSaSu
12
3456789
10111213141516
17181920212223
24252627282930

Upcoming events

Cambridge Finance Workshop - Erwan Morellec

May 04, 2017

Room W4.03, Cambridge Judge Business School

Cambridge Finance Workshop - Ulf Axelson

May 18, 2017

Room W4.03, Cambridge Judge Business School

Cambridge Finance Workshop - Katrin Tinn

Jun 01, 2017

Room W4.03, Cambridge Judge Business School

Previous events

Upcoming events