First off, not that many hedge funds are able to command 2/20 from the market anymore. Some of the very high profile ones still do, but the majority of funds nowadays are raising money at closer to a 1/20 or 0/30 level. Each time I hear "2/20" thrown around in the media I lose more hope in the idea that journalists are not merely randomly selected to write stories of a given word length. So, no one is really paying "2/20" for subpar hedge fund performance. They are paying something more along the lines of mutual fund management fees (they are a business that needs revenue to operate, after all), and they only make their 20 if the fund makes money (always subject to a high water mark). Look at AQR's recent offerings. A bunch of 40-Act funds. No 2/20 going on here. I'm not going to comment on Cliff Asness' investing prowess, but my opinion is that he definitely knows how to run a hedge fund as a business, and he is fully aware that this is where the business is heading.