kaal:claim:1428387-006

Because realization events for private equity investments occur infrequently, hedge fund managers have an incentive to avoid side pockets and to use estimated valuations for those investments instead.

Source quote, verbatim

The infrequency of realization events of private equity investments creates incentives for hedge fund managers to avoid side pockets and instead use estimates for the valuation of private equity investments.

From

Kaal, Hedge Fund Valuation Retailization, Regulation, and Investor Suitability (2009), II.A Convergence of Hedge Funds and Private Equity Funds, p. 6
https://ssrn.com/abstract=1428387 · source PDF

Cite as

Kaal, Hedge Fund Valuation Retailization, Regulation, and Investor Suitability (2009). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1428387

Holds when

where the hedge fund holds private equity style investments
where performance fees cannot be charged on side-pocketed assets

Classification

mechanismsupport: arguedrisk-and-incentiveseconomics

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