Wrappers / Structures

Stock appreciation rights may attract pensions


For every $1 billion of hedge fund investment, pensions would be about $12 million ahead on average annually by using stock appreciation rights structures (SARs), according to Optcapital, a firm that creates such incentive programmes for managers and investors.

The research shows that a $1 billion investment in a SARs fund over a five-year time period translates into an additional return of $60 million. Optcapital co-founder Rick Ehrhart says that the use of SARs can also dramatically reduce downside volatility. According to a white paper titled "Closing the Pension Funding Gap", the manager's share of the cumulative profits transfers