Real superheroes deliver real alpha. And real alpha doesn't come cheap:
One of the panels today at the “Delivering Alpha” conference is tackling just that question: whether hedge funds can justify the the “2-and-20″ fees they often charge. (The 2% is a management fee and 20% is for performance.)
AQR Capital Management’s Cliff Asness thinks its “a relatively fair number for real alpha.”
“Real alpha is something you can’t get anywhere else,” Asness said. “If you run the number, that is simply worth the 2-and-20.”
Other things that are hard to get anywhere else: things you can't get anywhere else.
Other panelists point out that, while the best money management talent is in hedge funds (as witnessed by Buffett hiring hedge fund managers as his successors at Berkshire), there are a lot of managers in a relatively few strategies, suggesting that alpha is rarer than 2-and-20 fees.
Hedge Fund Fees Totally Worth It, Says Hedgie [WSJ Deal Journal]