> The big debate is whether this is due to luck or skill, whether it's possible to tell the difference and whether it's possible to determine which fund manager will be successful in the future.
And the other factor is this: if it is skill, do the high-fees still give you a better risk-adjusted return?
> do the high-fees still give you a better risk-adjusted return?
Yes. With your standard 2 and 20 fee structure, you don't pay performance fees on anything below 8% returns. Performance fees are where bonuses come from, so anyone coming up short sees capital and employees disappear overnight.
RenTech has a 40+% performance fee on their Medallion fund because it consistently generates 60% returns YoY.
You might have indicated you were talking about a hedge fund with non public listings and no transparency. If investing was as easy as picking whatever did well in the past then we'd all be billionaires.
And the other factor is this: if it is skill, do the high-fees still give you a better risk-adjusted return?