"Incentives in Hedge Funds"
We investigate a game of delegated portfolio management such as hedge funds featuring risk-neutrality, hidden types, and hidden actions. We show that capital gain tax plays the decisive role in solving the incentive problem. We characterize the constrained optimal fee scheme and capital gain tax rate; the fee after taxation must be linear and affected by gains and losses in a low-powered and symmetric manner. We argue that high income tax incentivizes managers to select this scheme voluntarily. The equity stake suppresses the distortion caused by solvency.
Year of publication: |
2010-02
|
---|---|
Authors: | Matsushima, Hitoshi |
Institutions: | Center for International Research on the Japanese Economy (CIRJE), Faculty of Economics |
Saved in:
freely available
Saved in favorites
Similar items by person
-
"Role of Credit Default Swap in Bubbles and Crashes"
Matsushima, Hitoshi, (2013)
-
"4G Spectrum Auction in Japan: Japanese Package Auction (JPA)" (in Japanese)
Matsushima, Hitoshi, (2012)
-
"Optimal Multiunit Exchange Design"
Matsushima, Hitoshi, (2012)
- More ...