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by greedoshotlast
4092 days ago
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A missing point: It is very common for management fees to follow an 2 and 20 Fee Structure. Meaning they charge a flat 2% to keeps the lights on and pay outrageous salaries.
Then above a certain threshold an additional 20% of any profits earned. Why does this matter? IHMO this motivates funds managers to accumulate large AUM (Assets Under Management) to make that 2% larger. The fund manager is less motivated to make good returns since he knows he will still collect that 2%. So it might be better to remove the 2% flat fee and simple charge a percentage on the profits earned. This motivates the fund manager to actually generate returns before he makes a buck. Even if the market is going down he will still be motivated to outperform. |
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