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March 11, 2008

Comments

Espen Robak

Chris, for what it's worth, I think the main problem is that most of what we're paying incentive fees for just ain't alpha. I'm not just talking about paying for the risk-free rate of return (and typically we do when we "catch up") but, also, way too much of the return these days is just the return on illiquidity (long the most illiquid stuff, short the most liquid stuff, harvest the return increment - yawn), goosed up with leverage. Anyone can do this, it takes very little skill, so why pay for it? Anyway, just my 2c. Getting rid of the catch-up might be the best way to make sure the incentive fee really pays for performance.

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