To be fair, nothing stops hedge fund management from doing this. Most funds cannot justify a "2 and 20" fee structure right off the bat. However, there is a cer

To be fair, nothing stops hedge fund management from doing this. Most funds cannot justify a "2 and 20" fee structure right off the bat. However, there is a certain bias after having some track record of success to charge that fee structure (or more) as a way to signal you are a "big dog" fund to invest in. Does a private university need to have a list price of $75K a year? No, but they do this to signal they are "elite" (even if 80% of their students get financial aid and never pay that list price). Newer funds always start with a lower fee on AUM and sometimes have more creative fees on top of profits. My point on universities is largely grounded in my experience at Carnegie Mellon which acknowledged they were going to just start charging more to make themselves more elite (and while some of that money did go back into making the programs better, a lot did not) and it worked...