It's not an agreement to pay someone 3.6%. The author probably means that since you get 2 and 20, with a bit of performance it ends up being in that ballpark.
> That 2% is what you'd get charged by ANYONE with the skill and operations to manage that level of money.
Also not strictly true. Some of the large funds with (confidence in their ability to perform|managing enough money to not care about massive performance anymore) operate on 1/20 rather than 2/20.
>> two-and-twenty means 2% of assets under management every year plus 20% of any profit and 0% of any loss. why people agree to those terms is beyond me.
> Let's take a more generous example where the GP contributes 5% of the fund. After 10 years of 2% fees, the GP has put in 5% and taken out 20%, so their net contribution is essentially 15%.
Unless I'm misunderstanding what you're saying, I think you're confusing the carry and the management fee. you can't add/subtract those percentages, because they're not representation the same base quantity (ie, they're percentages of different things).
EDIT: Nevermind, I read "the GP has put in 5% and taken out 20%" as referring to a hypothetical carry of 20%.
> BART gets to withhold the last 5 percent payment for the $2.5 billion fleet until both sets of cars hit their maintenance targets
Is it just me or does 5% not seem like nearly a large enough percent? If I only had to hit 20% of my expected performance in exchange for 95% of my pay... I would have a lot more hobbies.
I guess I was defaulting to imagining the percentage would be based on published earnings. I can see how that wouldn't realistically work in this case on second thought.
I'm really confused by "50% of the average." Wouldn't the average be 100% of the average? I read "50% of the average" as paying someone half of what they are worth.
It's not an agreement to pay someone 3.6%. The author probably means that since you get 2 and 20, with a bit of performance it ends up being in that ballpark.
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