High‐Water Marks and Hedge Fund Management Contracts
研究对冲基金业绩报酬中的高水位线条款，发现业绩费对基金经理有价值但高水位线限制了其价值，并给出了特定条件下高水位线合约成本的解析解，为对冲基金管理公司估值提供框架。
ABSTRACT Incentive fees for money managers are frequently accompanied by high‐water mark provisions that condition the payment of the performance fee upon exceeding the previously achieved maximum share value. In this paper, we show that hedge fund performance fees are valuable to money managers, and conversely, represent a claim on a significant proportion of investor wealth. The high‐water mark provisions in these contracts limit the value of the performance fees. We provide a closed‐form solution to the cost of the high‐water mark contract under certain conditions. Our results provide a framework for valuation of a hedge fund management company.