An Empirical Analysis of the Performance of Hedge Funds Over the Period 1998 to 2003 in Terms of Incentive Fees, Management Fees, Size, Age, Hurdle Rate, High Watermark Provision and Lockup Period

This paper aims at testing empirically the major building blocks that affect the performance of Hedge Funds: incentive fees, management fees, size, age, hurdle rate, high watermark provision and lockup period. The sample is provided from Data Feeder dataset. It is very comprehensive and includes 680 funds for the period 1998 to 2003. According to my findings the results are mixed. Management fees and age affect significantly the performance of Hedge Funds. My findings suggest that there are other factors that could contribute to this deviation such as lock-up periods, hurdle rate and high water mark. Dummy variables applied on the probit binary regression equation suggest that these three factors constitute a significant explanation of the performance persistence