2008-09-02 — wsj.com
"You would think that investors would view hedge funds as having a good relative year, but my strong sense, however, is that most people are not pleased," says Reid Bernstein, who runs OneCapital Management Partners, a New York firm that invests in hedge funds. "Down is down and as the saying goes, you can't eat relative returns."
Looks like clients are expecting "hedging". Silly them. There is also this interesting and apt point:
In exchange for a cut of trading profits that usually amounts to at least 20% of all gains, hedge funds generally promise their investors that they will recover any losses before they begin to take their share. So a fund that loses 10% won't be able to reap profits beyond a management fee until it recovers that loss, called a "high-water mark."
The problem is many funds pay their employees hefty bonuses out of that performance fee, so top analysts and traders may leave if they don't see a prospect of a big bonus for years to come.
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