# kaal:claim:1428387-007

**Claim.** The hedge fund fee structure creates very strong financial incentives for managers to hide weak performance through valuation.

**Type.** mechanism  **Support.** argued

**Holds when.**

- where fees run up to 30 percent of profits and one to three percent of assets under management
- where high water marks apply

**Source quote.**

> The fee structure of hedge funds creates very strong financial incentives to hide weak performance by way of valuation. Hedge

**From.** Kaal, *Hedge Fund Valuation Retailization, Regulation, and Investor Suitability* (2009), II.B Fee Structure, page 7

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

**Verify.** sha256 of source PDF `6aa3a280dc6750723be2389f3af2aabf3a16c4ce20e49fcdaddd7f2ea95a67aa` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202009%20-%20Hedge%20Fund%20Valuation%20Retailization%2C%20Regulation%2C%20and%20Investor%20Suitability.pdf

**Topics.** risk-and-incentives, disclosure

**Keywords.** fee-structure, high-water-mark, manager-incentives, performance-reporting

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