https://www.bloomberg.com/view/articles/2015-05-05/rich-hedge-fund-managers-are-still-rich https://www.bloomberg.com/view/articles/2015-05-05/rich-hedg... >But

https://www.bloomberg.com/view/articles/2015-05-05/rich-hedge-fund-managers-are-still-rich https://www.bloomberg.com/view/articles/2015-05-05/rich-hedg... >But "hedge funds are a compensation scheme masquerading as an asset class," and maybe there's some value in the compensation scheme itself. If you are looking to hedge funds for outsize returns, you might want to pay your manager an option on your returns, by giving him a performance fee of 20 percent of the upside and limited penalties on the downside. Options increase in value with volatility, and giving a manager asymmetric rewards might encourage desirable risk-taking. That might be exactly what you want if you're a pension fund investing a small chunk of your portfolio with hedge funds in order to earn above-market returns. On the other hand, if your manager is already a billionaire investing a big percentage of his net worth alongside you, he might be more conservative with your money than you are, or than you want. It's probably more important for him to stay a billionaire than to rack up more money.