Managed Funds How Hedge Funds Get Rich (Hint: It’s Not Their Returns)

Discussion in 'Shares & Funds' started by Tropo, 20th Jan, 2017.

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  1. Tropo

    Tropo Well-Known Member

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    "The typical hedge fund fee structure (historically) is 2% of assets under management and 20% of all positive returns. Therefore, if you gave a hedge fund $1 million and they got a 10% return on it, their total take in fees would be:

    [$1 million * 0.02] + [($1 million * 0.1) * 0.2] = $20,000 + $20,000 = $40,000.

    This represents $20,000 for managing your money and $20,000 for their positive performance (i.e. the $100,000 they earned with your money). Despite their $40,000 fee, you would end up $60,000 richer than before you met them. Good deal, right?

    However, what if I told you that in less than 20 years the hedge fund would have more money than you (regardless of the size of your initial investment). Shocking, but true."

    How Hedge Funds Get Rich (Hint: It’s Not Their Returns)
     
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  2. Hodor

    Hodor Well-Known Member

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  3. twisted strategies

    twisted strategies Well-Known Member

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    i note back-door fees and commissions aren't mentioned , and since most of your hedge-fund portfolio would be subject to various derivative strategies ( FX hedging included).