This paper finds that fund managers do not expect mean reverting returns, as suggested by theory and empirical evidence …

This study examines whether the standard compensation contract in the hedge fund industry aligns managers' incentives … with investors' interests. I show empirically that managers' compensation increases when fund assets grow, even when … diseconomies of scale in fund performance exist. Thus, managers' compensation is maximized at a much larger fund size than is …

decrease in convexity of the relationship is associated with a decrease in managers' risk shifting. Low-performers undertake …