Short story about how screwed up asset mgmt industry can be. Many years ago we had a fund that was down ~20%, the PM was fired and a new PM with new strategies took over the fund.
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If we agreed it would have crystalized their losses and they would start again with a new high water mark. Obviously we didn't do it. Can't remember whether they redeemed or not, but the fund was back above high water mark within 15 months.
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Our perf fee was 20%. This allocator was willing to give up ~$4m (20% of 20% of $100m) of their investors' money rather than have a difficult conversation with their boss.
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British?
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it's wild how easily incentives can get out of whack in money management
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Which country was the pension in? Public or corporate? People give up HWMs all the time but not to give the money to the same manager in a new vehicle...craziness.
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So true. I would hope investment committees would follow the performance of funds post their redemption to better understand if they left money on the table. It simply doesn’t happen and a lot of value is destroyed.
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Lol I read this and thought “and?” And then realized we’re all probably pretty jaded.
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How do you even get a perf fee of 20% for being -20%
please teach me 
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Performance, alignment, transparency, agency issues all in one story. Captures the essence, as you say.
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