Many Investors devote lots of time to analyzing fund’s past performance, hoping that this can help to predict future performance, however the same investors barely spend any time on one of the true drivers of future returns: The Mangers. 




Most of the time, Investors overlook the true alignment of the interests between them and the Fund’s Manger




Many managers claim themselves to have “aligned” interests, however we have found two major discrepancies on this “alignment” 




1.- Management Fees




Some Managers charge “front-end” fees, which it reduces the net initial invested capital. Although there is nothing wrong with this model business, we believe that those Mangers might be highly focused on raising capital rather than looking, evaluating and doing deals. 




2.- Downside protection 




The “performance fee” (aka carried interest) allow the Mangers to get paid when things goes well, but what happens when market shifts, and things goes on a different direction? Does your manager offer any kind of “downside protection”? – If not, why are they only aligned in the good times, and not over the rainy days?




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