You can say this for hedge funds: More than most other businesses, they most embody the capitalist system. You do well, you make a lot of money.
You screw up, you don’t do so well. It is democracy — hedge fund style. The old ‘eat what you kill’ mentality. “It is all about performance,” GLG co-CEO Manny Roman recently told me. “It always has been.”
I know there are flaws to this system, especially in this 2 and 20 era. Large hedge fund firms with billions under management still make tens of millions of dollars on management fees even if they don’t make money from investing.
And the lack of clawbacks enable people like Eddie Lampert to make more than $1 billion in 2006 ....