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It seems that this sensational headline (and the subsequent article) leaves out a main point as to why this would be happening: performance fees paid prior to 2
by kevinrpope 15y ago
It seems that this sensational headline (and the subsequent article) leaves out a main point as to why this would be happening: performance fees paid prior to 2008.
Assuming the 2/20 fee structure, HFs would have taken 10 years of 20% fees on their performance before 2008 knocked out (according to the article) all of the returns for the previous 10 years. That would leave the investors back at 0, minus 10 years of 20% performance fees and 2% management fees. Given the time frame, I'm surprised the fees aren't greater than the realized gains.
- yummyfajitas 15y agoIt's also worth noting that many funds make performance feeds contingent on long term returns. So for the funds in question, if 2008 knocked out all their returns, they can't collect performance fees again until they have fully recovered from 2008. I.e., no more performance fees until the fund recovers from 2008.
- DevX101 15y agoThe managers are more likely to close the fund, open up a new fund under a new name and start the game over again. From this morning: http://darien.patch.com/articles/collapse-of-darien-hedge-fund-threatens-kentucky-state-pensions http://darien.patch.com/articles/collapse-of-darien-hedge-fu... http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2012/01/03/bloomberg_articlesLX89WS6K50YJ.DTL http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2012/01/03/...