Read all about carving up the bonus pool at Goldman Sachs. Thanks to David Zaring for the tip.
It's interesting that even Goldman Sachs is feeling the pressure of "2 and 20" -- losing people to hedge funds who are lured away by the promise of the industry standard 2 percent management fee, 20 percent profits interest comp structure at hedge funds. I've finally settled on a topic for my next tax paper: The tax consequences of 2 and 20. I'll be pointing out how the tax law subsidizes the 2 and 20 structure. (As if hedge fund managers weren't making enough money already.)
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1. Posted by William Henderson on December 4, 2005 @ 11:54 | Permalink
I think you are on to something interesting.
2. Posted by David Zaring on December 4, 2005 @ 15:22 | Permalink
Could be good - but if hedge fund compensation based on upside plus churn, I'll be interested to see how taxes matter to it and not other forms of compensation. Churn being pretty common, and upside presumably not being a unique method of payment - of course, the amount of the upside might make a big difference.....
Anyway, in light of this article, I will never ask for a raise by chanting at a banquet.
3. Posted by Shag from Brookline on December 5, 2005 @ 5:25 | Permalink
The "2 and 20" game should be contrasted with "40 acres and a mule". The former will succeed because few are involved whereas the latter failed, alas, because there were too many. (There are other contrasts as well.) So let's hear it for hedgehogs!
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