Fees for private equity and hedge fund managers, some of whom command 2 percent for management and 20 percent for performance, or even more, have become a heated topic. Berkshire Hathaway Inc.’s Warren Buffett and writer Malcolm Gladwell have taken public shots at the structure, and Gladwell specifically targeted Yale two years ago.
“What Buffett, Gladwell and other fee bashers miss is that the important metric is net returns, not gross fees,’’ the report said. “Weak or negative returns would result in low or no performance-related fees, but would be a terrible outcome for the university.’’
Yale’s investment strategy emphasizes long-term active management of equity-oriented, yet often illiquid assets, with more than half the fund in alternative investments. Almost a third of Yale’s 2016 allocation is in private equity, including 16.2 percent in venture capital and 14.7 percent in leveraged buyouts. About 22 percent is in absolute return with hedged-like strategies.
“Performance-based compensation earned by external, active investment managers is a direct consequence of investment outperformance,’’ it said.
Yeah, I get it. Some guys are just better than others at investing, and they should be compensated commensurately. The question is, are there high performers that can be had for less than 27% of your profits? Let's take a look at a theoretical blockchain focused hedge fund vs the ICODAO - from a graphical perspective. Realize that the ICODAO charges a flat fee for its services. It's not a hedge fund, so there are no performance fees, but there are certain things that it may not be able to do on its own (yet), hence has to contract out for. The fees are to cover what it takes to make this autonomous entity self sustaining. It may very well be the case that these fees will shrink over time. We don't know, we're breaking new ground here. The hedge fund fees are self explanatory.
There you go. In a nutshell. Here's more...
Yes, the machines are taking over! Be sure to take part in the Veritaseum Token Offering, take part in the paradigm shift! Feel free to contact me directly with any queries via the contact form in the top menu.
