Advertisement
If you have a new account but are having problems posting or verifying your account, please email us on hello@boards.ie for help. Thanks :)
Hello all! Please ensure that you are posting a new thread or question in the appropriate forum. The Feedback forum is overwhelmed with questions that are having to be moved elsewhere. If you need help to verify your account contact hello@boards.ie

Are Hedge Funds a scam?

Options
  • 19-03-2009 10:38am
    #1
    thee glitz
    Registered Users Posts: 2,294 ✭✭✭


    I've been reading a few bits lately which have made me concerned for the future of hedge funds (and not just their 2008 returns!). Is it all a big scam, this typically 2/20 industry? This refers to the fee structure where investors typically pay 2% in management fees and 20% of profits made after that to align the fund manager and investors' interests. Usually, the 20% incentive fee isn't subject to a hurdle rate and is payable at the financial year end. It's all well and good taking investor's cash, leveraging it, and outperforming the market with derivatives etc. but what happens when the market takes a dive? Investors won't get their incentive fees back from previous years and end up with scrap positions they may not even be easily able to get out of. Some funds did well last year and will deservedly attract more capital, while the likes of Universa had an exceptional year (in the good way). As an industry, where is the value being added that warrants such generous payouts to fund managers? This could matter to a lot of people employed in the IFSC.
    Tagged:


Advertisement