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Total Posts: 462
Joined: Apr 2005
Posted: 2016-09-30 01:44
Don's disagree with you - although the fact is that they are the funds (that I know of) that don't outright charge the "2%2 that many funds do
Also - costs are not just 2% - 2% (or whatever the headline management fee is) is great for what the IM takes - but it is different in every fund prospectus / OM / PPM what it is permitted for the fund to pay - in terms of not just expenses like everyone must do (fund admin, audit, independent directors etc) - but some kind of research / data expenses. Lots of other things are permitted to be paid by the Fund - as long as disclosed...

Developed and 'clean' funds (hedge funds) who choose to put through little costs may get that TER (ex Management Fees) down to 20-50bps when they have scale - but expect most sub $0.5bn funds to have that TER higher that that...

So add the TER to the management cost - that is the 'fixed / cost'. And while the TER items will (have to be) detailed (Fund will pay Administration, Custody and... etc' - the amounts rarely are...

All part of the ODD that institutional investors do / (should do...)


Total Posts: 404
Joined: May 2012
Posted: 2016-09-30 09:30
I'd be curious, if I wanted to put my hands and eyes on some of these non-2/20 fund prospectuses Millennium, Citadel, etc., would any of you be so kind to slip it (cough cough, email it) anonymously under my office door?

Just for learning purpose...

The only thing that counts: can you make money?

Founding Member

Total Posts: 1354
Joined: Mar 2004
Posted: 2016-09-30 11:58
I wasn't suggesting the costs+0/20 was cheaper - just that it's out there. In many ways paying PMs as costs makes you a FoHF with 0/20 taken after paying the "funds" (i.e. PMs).

Capital Structure Demolition LLC Radiation


Total Posts: 404
Joined: May 2012
Posted: 2017-08-21 10:25
> Alpha is a lie.

Goldorak, when you say Alpha is a lie, do you mean that Alpha in your view is just a risk that the investor doesn't yet understand? In other words: alpha =additional unidentified risk
(or would you mind to elaborate further your comment?)


Total Posts: 1046
Joined: Nov 2004
Posted: 2017-08-21 11:35
Alpha is just something you as an investor cannot understand, explain or replicate.

It can be because you are not using the right factors, the right time scale or the right tools.

Just consider someone being long the S&P500 everyday between 10:12 and 10:18, systematically, producing incredibly large returns and being of course completely uncorrelated with the S&P500. To a dumb investor this is all alpha. But if the investor regress daily returns of the manager providing all 5 minutes possible combinations of S&P 500 returns, it is yet another beta.

Now just complicate the stuff. If the 10:12-10:18 timing changes everyday, depending on some exogenous variable, as long as you do not know that variable or have it considered as a potential factor, there is no way you are going to make that alpha interpretable, and hence make it a beta again.

However, the beta stays. If the market is down -25% between 10:12 and 10:18 on the wrong day, you are gonna feel the beta, believe me.

The whole confusion is consultant-related. Back in the early 21st century, they were confusing institutional investors with "alpha" and "absolute returns". In their heads, it stayed: with alpha, you cannot lose.

If you are not living on the edge you are taking up too much space.


Total Posts: 404
Joined: May 2012
Posted: 2017-08-21 14:26
Thank you for clarifying, I did understood correctly what you did mean, and I totally agree with it.
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