There is a problem with this analysis - the 449 figure is capital paid out, not gains. The worst funds have their capital withdrawn at the fastest rates; investors in the best funds tend to keep their capital put.
By Lack's metric, which ignores un-realised gains, Warren Buffett's Berkshire Hathaway, which hasn't paid a dividend but pays salaries to its "managers" is a ruddy failure of an investment institution.
It should also be noted that not all cash taken by the fund manager as compensation goes straight into the mamagers' pockets - there are staff, Bloomberg terminals, and office space to be paid for. At smaller funds, the 2% asset fee can sometimes barely cover that.
The FT author likens hedge fund statistics to a "statistical minefield". Rather helps if you don't lay the mine you blow up.
The article does call them gains, but if it's truly only the capital paid out this is a good point. More likely, these numbers are abysmal because of the poor performance of equities over the selected period (1998-2010) and consequently the fact that investors have paid a lot in 2% management fees and received little upside in the way of gains.
We also have to marry this to the reality that most hedge fund managers have around 2/3 of their net worth in their funds.
When markets crash you see more redemptions from bad funds than good funds; by only observing redemptions the good are ignored and bad are counted. Since those funds are still charging asset fees, the numbers are probably distorted towards 100% the worse the preceding period's equity market performance.
Are hedge fund structures in need of reform? Probably. Do we need to warp and mis-represent statistics to accomplish this? No.
Bottom line is that saying that the ratio of cash out to operators to cash out gross is 84% is meaningless given that it has survival bias built in - in the inverse. Bad funds who dissolve and result in massive outflows are over-represented. Those that succeed and hold capital, e.g. Berlshire Hathaway and Renaissance'a Medallion Fund, are ignored.
I'm just imploring the HN community to remain objective, even when bad evidence seems to agree with our pre-conceived notions.
By Lack's metric, which ignores un-realised gains, Warren Buffett's Berkshire Hathaway, which hasn't paid a dividend but pays salaries to its "managers" is a ruddy failure of an investment institution.
It should also be noted that not all cash taken by the fund manager as compensation goes straight into the mamagers' pockets - there are staff, Bloomberg terminals, and office space to be paid for. At smaller funds, the 2% asset fee can sometimes barely cover that.
The FT author likens hedge fund statistics to a "statistical minefield". Rather helps if you don't lay the mine you blow up.