What is your approach to fees? Wednesday 24th January 2018
We charge a flat 2% fee, because contrary to popular opinion, performance fees are a terrible incentive for the hedge fund manager. A performance fee is in effect a call option on the future return of the fund. The value of an option is primarily dependent on the risk of the underlying. Unsurprisingly, managers take on as much risk as possible, because that makes their option more valuable. When markets fall, the customer takes the loss. Hedge fund managers often open three or four different funds, using long or short bias strategies. The firm is guaranteed to make money, no matter what the market does.