Hedge Funds And Their Managers’ Income Problems In Different Incentive Mechanisms

With the rapid development of the world economy, all kinds of financial derivativeinstruments came into the world, hedge funds have also been favored by more and moreinvestors. According to statistics, by the end of2011, global hedge fund assets under managementtotal about$2.12trillion, is four times as large as2002hedge fund,, hedge fund market is thriving.The majority of investors are concerned about hedge funds but also a lot of people started to payattention to hedge fund managers income problem, they are thinking about how to make managersmaximize rewards,and to prevent hedge fund managers speculation, what incentives can makehedge fund managers to do their best to run hedge funds. China’s current financial environment hasbecome increasingly mature,and we already have the advantage of the development of hedge funds,so the study of hedge fund managers and incentive mechanisms is necessary.This paper firstly introduces the development of hedge funds, the current problems,as well asthe income and incentive problems of their managers studied by domestic and foreign scholars.Then the definition of hedge funds, classification, development and current manager incentivemechanisms are introduced,and we establish mathematical model, get a maximum of hedge fundexecutive pay,and conclude that to avoid the speculation of hedge fund managers,we should useincentives combining two mechanisms. Finally Summarizes the international experience of thedevelopment of hedge funds in the two countries, Japan and America, induces the hedge funddevelopment restriction factor and the current hedge fund managers’ incentive mechanism and theexisting problems, we put forward the feasibility analysis for hedge funds’ development in China,and suggestions for the managers’ incentives.