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This article was authored by Bryan Goh, First Avenue Partners LLP, London.

Ideal Hedge Fund Terms:

For a host of reasons, hedge funds have not offered the most investor friendly terms. The cynical view is that hedge fund managers will get away with as much as they can. The fees are high, the performance fees are charged and cannot be reclaimed if there is a subsequent loss, the manager is drifting into markets and strategies managers are unused to, liquidity is unilaterally suspended just when investors need to exit... the list is endless.

The more charitable view is that hedge fund managers have little idea how a fund should be structured; they are traders and portfolio managers and have little time or attention to spend on fund structure and terms. To be sure this is a major failing since any business needs management of liabilities as much as assets. It is telling that we refer to them as asset managers because liability management often faces neglect. And so, here is my attempt at constructing a set of fund terms and principles which are hopefully fair to manager and to investor.

Overriding Principle:

The money is yours. It is my privilege to manage your money. It is not your privilege to invest with me. Your interests come first. If that was ever violated then I am out of business. I will treat your money better than my own.

Side Pockets:

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