According to Financial Times, hedge fund managers in danger of missing out on lucrative performance fees routinely raise their exposure to risk in a gamble to meet their performance targets, according to new research. The study ‘The gross truth about hedge fund performance and risk’ raises questions as to whether hedge fund managers are acting in the best interests of their investors - who may want a consistent approach to risk - or are more interested in maximising their own bonuses.

"The investor wants them [hedge fund managers] to carry on doing what they mandated them to do from day one. Maybe performance fees don't provide the right incentives," said Nick Motson, one of the authors of the report. "The initial finding was this does not look good." Christopher Peel, chief executive of Blacksquare Capital, a fund of hedge funds manager, added: "I want to see managers consistently running risk throughout the year in accordance with the opportunity subset."