2013-06-01 — ritholtz.com
``Those outsize hedge fund fees are an enormous drag on performance. But they do create wealth -- for the managers. "Two and twenty" as the industry calls it, is why even middling hedge fund managers can become billionaires. According to Simon Lack, author of "The Hedge Fund Mirage," this fee arrangement is effectively a wealth transference mechanism, moving dollars from investors to managers. As he puts it: "While the hedge fund industry has generated fabulous wealth and created many fortunes, it has largely done so for itself."''
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