# kaal:claim:2748096-017

**Claim.** The performance pressure on hedge fund managers incentivizes them to take disproportionately high risks in order to deliver sufficient client returns, and those disproportionate risks translate into proportional systemic risks.

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

**Holds when.**

- holds where managers must generate returns sufficient to retain clients

**Source quote.**

> Arguably, in order to obtain sufficient returns for their clients, hedge fund managers are incentivized to take disproportionately high risks in their management strategies, which can translate into proportional systemic risks.

**From.** Wulf A. Kaal, Timothy A. Krause, *Hedge Funds and Systemic Risk* (2016), Risk-Management Incentives, page 7

**Cite as.** Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096

**Verify.** sha256 of source PDF `8f30260f2c1db728b45c4f3b9b7c64358cf9d3217277bc3c63a910c32f87b508` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20and%20Krause%20-%202016%20-%20Hedge%20Funds%20and%20Systemic%20Risk.pdf

**Topics.** risk-and-incentives, systemic-risk, private-funds

**Keywords.** manager-incentives, risk-taking, systemic-risk, hedge-funds

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