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> It isn't even like its closest competitor: private equity. They only get to take performance fees on exits, which can take years or even decades (or never) to
by vostok 10y ago
> It isn't even like its closest competitor: private equity. They only get to take performance fees on exits, which can take years or even decades (or never) to materialize.
I would argue that private equity is much worse on fees than hedge funds. Among other offenses, they're able to charge fees to both portfolio companies and investors. The investors usually get a credit for the fees paid by portfolio companies, but it's not a 100% offset.
To an outside observer, this seems to buy you performance that isn't too different from exposure to infrequently marked leveraged standard risk premia.
- kolbe 10y agoPrivate Equity has its own little scams, no doubt. But that doesn't excuse the hedge fund business's "top tick" performance fee scam. Basically, a person like Ackman and some friends could (in theory) bid up a stock 1000%, mark it there at the end of the month or year (or whenever they account for the performance fee), take their performance fee on that mark, and let it crash. In fact, doesn't that sound a lot like Valiant? 30% of the company was owned by Ackman and people close to him.
- jgalt212 10y agothis would make for a good story line in Billions.
- vostok 10y ago> Basically, a person like Ackman and some friends could (in theory) bid up a stock 1000%, mark it there at the end of the month or year (or whenever they account for the performance fee), take their performance fee on that mark, and let it crash. In fact, doesn't that sound a lot like Valiant? How much do you think Ackman lost in personal money on Valeant? You don't think it's much more than the performance fees that he earned from it?
- deleted 10y ago[deleted]