[wmf]

blowing investors' money on lavish staff events, which is a dick move but not necessarily illegal

I'm not an expert on this topic, but if a limited partner agrees to something like "2 and 20" fees doesn't that imply that the other 98% of the money is to be invested and not used for expenses? 2% management fee on $64M assets is only $1.2M which is pretty small considering the size of staff they had.

It's less bad if the investors agreed to high fees, but it could still be embezzlement if the money was spent on personal stuff.

[aml183]

There is something called fund expenses. A GP can allocate part of the fund to pay towards expenses they deem to be fund expenses. For example, the audit would be classified as a fund expense. Most funds have an outside administration company that handles the money and approves/rejects these decisions.

[qeternity]

Many funds have "chargeable" expenses like research and travel. These come directly out of the fund and not the management fee.

Source: former hedge fund trader