In Sync

摘要

Most of the great asset managers I know-espe-cially among hedge funds, private equity funds and venture capital funds-tend to think of alignment of interests with limited partners as little more than the provision of eye-popping investment returns. In fact, many general partners invoke the returns they've delivered to universities, firefighters, teachers and police officers in justifying their business models and approach to fund relationships. But while we'd all agree that the prospect of delivering high returns to middle-class workers is exciting, it's not alignment. I'd argue that establishing and negotiating a fund relationship on the basis of historical returns actually distorts incentives and misaligns interests between GP and LP. Let me explain. My baseline expectation, which I draw from empirical research, is that amazing managers that do actually create persistent value tend to capture the lion's share of that value. Add to that the fact that past performance is not a reliable predictor of future returns, and LPs that agree to bad terms on the basis of past performance are undeniably putting themselves in a dangerous situation. Go ask that god of venture capital how his clean-tech bets played out. Or that hedge fund legend how his gold bet fared. The reality is this: Great fund managers aren't great forever. So even when you're dealing with the best managers in the world, alignment matters.