Excess Returns  cover image

Replicating Hedge Fund Strategies with Andrew Beer

Excess Returns

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The Buffet Partnership and the Two and 20 Fee Structure

The two and 20 fee structure came out of like the late 1970s when entrepreneurial investment managers were trying to get started. The idea was, you know, give these guys that 20% until they got a stab, the 20% of profits until they got established. It wasn't 20% over anything because there were no benchmarks. And so what happened was as the industry got really big, the 2% is a lot more profitable than the 20%. Because if you can keep that 2% alive for the next 10 or 15 years, that's where the multiples people would put on that.

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