Relevant:
2008-05-08 — gurufocus.com
A hedge fund manager is paid an incentive bonus if the fund that is being managed is able to achieve returns greater than some benchmark. In other words, the fund manager shares in the profits when profits are good but doesn’t share in the losses. This type of incentive program encourages risk taking as the fund manager will do very well if the risk pays off but doesn’t suffer the pain of a big loss.
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