Matthew Lynne at Bloomberg.com examines what price the market puts on hedge fund profits. Lynne notes that many hedge fund managers pull down enormous salaries, but the few hedge fund companies that are public do not receive premium valuations from the market. This may be due to the belief that there is not a great deal of growth in hedge fund fees, due in part to fee compression. Lynne writes:

There is a straightforward explanation for that. The relatively low price put on the hedge fund companies says two things. First, the rapid growth rates of the industry probably won’t last. Next, the 20 percent performance fee that hedge funds typically charge can’t last, either. In effect, the business model the hedge funds have created won’t work much longer.

As Lynne notes it is surprising that more hedge fund managers have not come public. It would certainly aid trying to create more long-lasting enterprises. Then again, given the current regulatory environment, would you blame the managers for wanting to remain private?

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Please see disclosures here.

Please see the Terms & Conditions page for a full disclaimer.