They also get paid exceptionally well to generate exceptional returns, so they make money either way. There is a relatively common saying in finance that 2 & 20

They also get paid exceptionally well to generate exceptional returns, so they make money either way. There is a relatively common saying in finance that 2 & 20 is the best business model that exists. As for LP returns, if you're not investing in a top quartile (or decile) fund, you're wasting your time. There is still some turnover in which firms perform but it's relatively consistent. Edit: I've skimmed the article, the other thing that isn't mentioned is that the 2% management fee is generally paid back to investors out of profits (if there are any).