Partners are taxed on their share of partnership income only when a partnership-level realization event occurs, regardless of how long it takes for such an event to transpire or how many years go by before realized funds are distributed. It happens when the income comes in short term and is deferred or carried until it is long term for tax purposes. - Carry
Measure profit minus adjusted income taxes. Och-Ziff reckons this distributable-earnings figure is a more accurate gauge of its performance than Earnings per share. Market watch
The fee based part of the dividend is more predictable than the performance fees. A Hedge Fund may have fees that barely cover expenses in years with low incentive fees, and receive relatively gigantic payouts during periods when the performance fees apply.
An expression believed to have been first applied in 1949 to a fund managed by Alfred Winslow Jones. His private investment fund combined both long and short equity positions to “hedge” the portfolio’s exposure to movements in the market. Hedge funds are largely unregulated and therefore are free of the restrictions that keep most mutual funds from pursuing untraditional investment strategies like selling short and investing in complex derivatives.
Hedge fund managers
Have their own money on the line usually seeking absolute returns. The 20% of profits is particularly beneficial since that income generally receives favorable capital gains tax rates. Being allowed to own the management company sidesteps those charges and the stringent income and net worth requirements attached to hedge fund investing.
Unlike many hedge funds, Och-Ziff uses very limited leverage, the practice of borrowing multiples of the firm's assets under management to enhance returns. Management gets 20% of the profits on other peoples money when it goes up, none of the losses when it goes down.
Multi-million-dollar blocks of “private” capital from a limited number of wealthy investors or institutions, as opposed to the “public” money from unlimited numbers of investors holding exchange-traded, SEC-regulated securities. Investors in private equity funds contractually limit their ability to withdraw their capital.
One of the things that you might notice. Instead of offering a product and trying to sell it like a mutual fund salesmen. Instead he acts as Investment Counsel which earns higher fees. Emphasis is on finding out what the client needs and providing it on a three year agreement with 2% and 20% fees. Then getting them to bring him more problems to solve, so that they re-up with more funds later on. Instead of offering one strategy to all, they try to mold a strategy to meet the pension fund or Investment banks clients needs.
Two and Twenty
Investment Counsel use to get 2% annually of assets under management, Hedge funds enjoy the “two and 20" fee structure, in which asset managers are paid 2% of assets and 20% of profits.
The French word for “slice." A piece, portion or slice of a deal.