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Actually hedge fund managers tend have a large portion of their net worth invested in the fund also.
by supster 10y ago
Actually hedge fund managers tend have a large portion of their net worth invested in the fund also.
- andrewprock 10y agoOnly the new ones.
- amluto 10y agoEven when this is true, it doesn't necessarily solve the problem. Say you're 28 years old and you're running your first fund. You have a net worth of $500k (because you worked 100-hour weeks as a banker for a few years, paid your student loans, and saved up). You put $400k into your fund and raise $50M. You charge a 25% performance fee. If you get 10% returns, that's $1.25M for you (at a possibly low tax rate, too) plus $40k on your own investment. If you lose 20%, you're out $80k. What's your incentive here?