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1. Nobody else targets such high returns. 2. If investment banks structured themselves as hedge funds, they would have a higher payout. Employee compensation r
by byrneseyeview 17y ago
1. Nobody else targets such high returns.
2. If investment banks structured themselves as hedge funds, they would have a higher payout. Employee compensation routinely hits 50% of pretax profit. Assuming a bank gets an average return on equity of 10%, and bonuses are as large as salaries (lots of small bonuses, a couple really huge ones), that's a 5 and 25 bonus structure. Damn.
- dpapathanasiou 17y agoThat's the argument funds use to justify their fee structure to their LPs. In most cases, the LPs do worse than anticipated specifically b/c of the '2 and 20' fees. As Harry Kat said in the New Yorker article: "They are charging more than they are adding. I'm not saying they don't have skill; I’m just saying they don't have enough skill to make up for two and twenty."