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Good insight, but the incentives don’t exactly match up to how you describe. Their investments actually looks like an American option instead of a Euro option b
by smabie 7y ago
Good insight, but the incentives don’t exactly match up to how you describe. Their investments actually looks like an American option instead of a Euro option because they can flip their investments when in the black. Since it’s not possible to cash out Euro options in this way, their incentives and compensation look much more like American options than Euro ones.
- H8crilA 7y agoYeah, realistically it's something like a call option, not exactly European or American. The details depend on how precisely is the fund structured. Most importantly - when exactly the fund managers are allowed to cash-out their 20% of wins (at the end of life of the fund? perhaps the fund is in principle perpetual? perhaps whenever there's a successful "exit" of one of the investments? perhaps every year if it's in the green?).