US Hedge Funds Bailout

Wrote about the airlines bailout, which some gave constructive comments saying shares buyback didn't cause the need for bailout i.e. virus. But leveraged positions from HF against the repo markets??? They lost their bets but if they lose the market collapses so the Fed has to commit. So it's now the feds responsibility to support moral hazard for hedge funds??

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"panFriedSebas" But leveraged positions from HF against the repo markets??? They lost their bets but if they lose the market collapses so the Fed has to commit.

What makes you think the markets will not collapse regardless of what happens to the hedge funds?

No bailouts for hedge funds. The hedge fund industry is great for the people who work it but IMO not so great for the investors in some of the funds. The fee structures sometimes favor the hedge fund managers at the expense of investors . I could be wrong but I think some of these hedge funds still use the 2 + 20 structure, which means if the fund performs exceptionally well, the team gets the base fee plus 20% of the gains. However, if the hedge fund performs poorly, the team still gets the base fee. I think a more fair structure would be to tie the team's compensation to the results. (good and bad). If the fund performs exceptionally well, the team gets a greater fee but if the hedge fund performs poorly, the base gets reduced.

 

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