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Crystallization – the Hidden Dimension of Hedge Funds' Fee Structure

Gert Elaut, Michael Frömmel and J. Sjödin ()
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J. Sjödin: -

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: We investigate the implications of variations in the frequency with which hedge fund managers update their high-water mark on fees paid by investors. We rst doc- ument the crystallization frequencies used by Commodity Trading Advisors (CTAs) and then perform simulations and a bootstrap analysis. We nd a statistically and economically signicant eect of the crystallization frequency on the total fee load. Hedge funds' total fee load increases signicantly as the crystallization frequency increases. As such, our ndings indicate that the total fee load not only depends on the management fee and incentive fee, but also on the crystallization frequency set by the manager.

Keywords: Hedge fund; CTA; Incentive fee; Fee structure; Gross returns; Crys- tallization (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2014-01
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:14/872

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