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> AR Magazine said Mr. Shaw, who gave up day-to-day oversight of [D.E. Shaw's funds] in 2002, made the list because the firm charged a 3 percent management fee
by karzeem 16y ago
> AR Magazine said Mr. Shaw, who gave up day-to-day oversight of [D.E. Shaw's funds] in 2002, made the list because the firm charged a 3 percent management fee and took 30 percent of the investment gains.
What's the justification for management fees at all, let alone such a steep one? Their cut of the profit in fat years should be enough to keep the doors open in lean ones. Such fees also create a perverse incentive to simply get as much money under management as possible.
- thrill 16y agoTheir justification is that participation is entirely voluntary and their track record makes those participating want to be there.
- hugh3 16y agoI'm tempted to say "Hey, if you don't like it then don't invest your money with D. E. Shaw". On the other hand, how much of the money that goes into D. E. Shaw is invested by folks who aren't actually investing their own money? (eg managers of pension funds, et cetera).
- cynicalkane 16y agoWhat's the justification for management fees at all, let alone such a steep one? The justification is that people are willing to pay it. Of course, you're probably asking not whether people pay it, but whether it's a fair price. The answer is no in general; hedge funds historically have underperformed the market.
- karzeem 16y agoYou're of course right. I'm questioning whether it's a wise price to pay. A lot of funds' results take a big hit once you account for fees.
- nolite 16y agoprofits from hedge funds aren't actually infinitely scaleable.. By taking on new investments, they increase their risk of strategies giving them less returns