Daniel Moser

Fortress Raises Redemptions Drawbridge

I would love for someone to explain to me how anyone who can invest in the common stock of these hedge funds can ever expect to earn any money?

It seems to me, these securities are a terrible way to get access to the hedge fund scene. Unless I am mistaken, investors who buy FIG and other publicly traded hedge funds are shareholders in the management company of these funds. Thus, the only earnings theoretically applicable to shareholders are management fees and performance bonus. The big catch though is that the performance fee isn't applicable to the management company since it is accounted for as "carried interest" within the hedge fund entity itself. To someone more intelligent on the subject, please feel free to correct me, but it seems to me the best the shareholders of FIG could ever dream about earning in EPS is 2% of the AUM. This problem is just compounded when you figure that the 2% is really just revenue. Once you subtract out expenses of the employees there is not likely to be anything left for shareholders. Why then would you ever purchase these securities?