The Origin of Incentive Fees and Other Hedge Fund Trivia

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Investment Performance Measurement Feature Articles
July 2011 | Vol. 2011 | No. 1 | 2 pages
Source: CFA Institute
Timothy F. Peterson, CFA, CIPM

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Abstract

In response to increasing interest in hedge funds and their fee structures, the author summarizes the establishment of two early funds—whose founders extrapolated substantial personal wealth through the performance incentive fee—as well as the term “hedge fund” itself. Finally, the author identifies the origin of the popular “2 and 20” fee structure.

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Topics
Performance Measurement and Evaluation
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Portfolio Management
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Private Wealth Management
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