I have argued before that hedge fund fees were poorly designed, and in that article had suggested a possible design for performance fees. Here I provide more detail into what I think is a practical solution which addresses some but not all of the problems with current fee structures.

Leverage. It always gets blamed whenever bad things happen to investments and markets. But leverage in itself is neither good nor bad. Leverage is a magnifier of returns, both positive returns and negative returns. The idea behind leverage is that it can be used to make a small return into a big return. Here is

Dear China,   Thank you for being a good partner over the last decade. You have been a great help in helping to keep inflation low by being a low cost producer. We have been happy to export our productive capacity to you. We have been happy to buy your exports. While this has created

  With the meltdown in financial markets and the near collapse of the banking system last year, hedge funds have come under increasing regulatory scrutiny. Whether or not this is justified is another matter. There is certainly justification for more scrutiny and more useful regulation with the emphasis on the useful. Unfortunately the trend has

Equity and credit markets continue to fall. Investors have shifted their allocation into cash and government bonds. Correlations between assets is not 1. In fact, correlations between hedge funds and other asset classes such as equity have fallen from 95% in 2006 / mid 2008 to 70% currently. Moving allocations into a risk free asset