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With institutional hedge funds, there are layers of fees to pay irrespective of performance.
Private hedge fund managers like the legendary Ed Seykota only gets paid with performance of say about 30% on profits when the fund is closed usually 3 -5 years, unless a certain percentage of capital is lost eg 30%, then the fund will be closed prematurely. If they do not perform, they do not get paid at all.
I wish to add in passing that my mentor Ray Barros who has been very successful in his private hedge funds, also follows the footstep of Ed Seykota in rewarding himself only if he performs well.
His Barros Swing methodology enabled him to produce a Value Added Measurement Index (VAMI) from A$1000 in 1990 to over A$500,000 in September 2010.Track records can be read at:
Idkit aka Ana