From the Financial Post: Some hedge funds aren’t delivering
even the market return but they are delivering a higher risk, says Jeff
Banfield, a former hedge fund manager who made a very controversial speech a
few years back — titled Heads They Win, Tails You Lose — about hedge fund
compensation.
In that speech, to a hedge fund manager’s conference, he
said that “the current compensation structures incorporated into hedge fund
offering documents are a cesspool of the past executive abuses that were
thought to have been extinct…. the need to change the way managers are
compensated, how they treat their investors’ capital, and how they provide
liquidity and transparency has never been more important than it is today.”
Banfield argued against the 2/20 rule where managers get an
annual 2% management fee plus a carried 20% interest if, but not always,
certain performance hurdles are reached. That combination helped “encourage
managers to negatively impact long-term returns by increasing overall risk to
investors; at the same time, the structure allows managers to reduce their own
risk exposure….”
No comments:
Post a Comment