Redefining Fees and Performance

Managers and investors both stand to gain if performance fees are charged on realized gains, not theoretical ones.

At a recent hedge fund conference attended by some of the world’s biggest pension plans, foundations and other institutional investors, much of the focus was on the lessons learned from the multibillion-dollar collapse of Amaranth Advisors. As the hedge fund industry explores various preventions and solutions — and politicians seize the opportunity to try to enact more regulations — one thing is certain: We need to do a better job of aligning the interests of managers and investors.

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