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Posts Tagged ‘hedge fund revenue model’

Hedge Fund Collusion to Pound Euro?

Posted by Larry Doyle on March 3rd, 2010 12:35 PM |

Meeting industry friends and colleagues for dinner, drinks, and market talk is standard fare. In fact, I would say it is good business as it is important to develop relationships within the industry.

That said, the development of these professional relationships and the interaction amongst the professionals should never come at the expense of professional ethics and integrity. I did witness more than a handful of times individuals from different shops on both the buy-side and the sell-side of the industry push the envelope very close and sometimes over that ethical line.

Not always, but very often, the ethical shortcomings involved hedge funds. Why? The revenue model for hedge funds (typically 2% asset management fee and 20% of profits derived) serves as a huge incentive for traders at hedge funds to gain an edge and act upon it as much as possible. The fact that the hedge fund traders and managers have a direct stake and an accompanying vested interest in the profits fuels this crowd like nothing else. (more…)






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