Hedge fund managers are compensated via management fees on the assets under management (AUM) and incentive fees indexed to the high-water mark (HWM). We study the effects of managerial skills (alpha) and compensation on dynamic leverage choices and the valuation of fees and investors' payoffs....

This article evaluates whether risk taking decisions of Brazilian hedge funds are influenced by past performance. More specifically, it is evaluated whether changes in funds volatility from one semester to the following are related to performance in terms of returns relative to its peers. The...