A recent article at the Economist examines a new paper out by two professors at the Case Business School in London. The paper, “Locking in the Profits or Putting it All on Black? An Investigation into the Risk-Taking Behaviour of Hedge Fund Managers”, written by Andrew Clare and Nick Motson, looks at whether hedge fund managers let the fee structure affect the way they run their hedge funds.
A few of the findings from the study include that the hedge fund managers have built in protection from the years where hedge funds perform poorly. Also, that managers who have a solid performance throughout the year typically tend to reduce risk towards the end of the year. For more on this, read the article at the Economist.