PROFIT SHARING IN HEDGE FUNDS
研究了一种新的对冲基金管理人薪酬方案（首损方案），与传统方案相比，在合理参数下可同时提高管理人和投资者效用并降低基金风险，但若绩效费用过高则对投资者不利。
Abstract In a new scheme for hedge fund managerial compensation known as the first‐loss scheme, a fund manager uses her investment in the fund to cover any fund losses first; by contrast, in the traditional scheme currently used in most US funds, the manager does not cover investors' losses in the fund. We propose a framework based on cumulative prospect theory to compute and compare the trading strategies, fund risk, and managers' and investors' utilities in these two schemes analytically. The model is calibrated to the historical attrition rates of US hedge funds. We find that with reasonable parameter values, both fund managers' and investors' utilities can be improved and fund risk can be reduced simultaneously by replacing the traditional scheme (with 10% internal capital and 20% performance fee) with a first‐loss scheme (with 10% first‐loss capital and 30% performance fee). When the performance fee in the first‐loss scheme is 40% (a current market practice), however, such substitution renders investors worse off.