@sol is going to love this thread.
If you already know what I'm going to say, do I even need to say it? I think my work here may be done.
Hey Jeff Carleton, what's your fee structure for active management look like? I mean, other than gratuitous bloodsucking, how exactly are you personally turning a profit from people who might foolishly give you their money to manage?
I'm a strong proponent of index investing. My opinion is that it is unfair to investors to charge them money simply because they trusted you with it, so I have a 0% management fee. As a comparision, VTSAX charges 0.04%. I also believe that managers have no justifiable reason to take your money unless they can beat the market, because otherwise, people might as well just stick their money in an index fund. Therefore, I only charge a fee toward the positive return that beats the stock market index fund (i.e. the value that I am adding), of 50%.
A few examples:
I receive no fee if I lose you money, even if I beat the market:
Market index = -10%, my fund = -5% --> I receive nothing
Market index = -5%, my fund = -10% --> I receive nothing
I make you money but don't beat the market, I receive nothing:
Market index = 20%, my fund = 15% --> I receive nothing
I make you money and the market loses money:
Market index = -10%, my fund = 10% --> I receive 50% of the positive return, so I get 5% and you get 5%
I make you money and beat the market:
Market index = 20%, my fund = 30% --> I receive 50% of the excess, so I get 5% and you get 25%.