i worked at a startup called addepar for several years, making software for asset managers.<p>addepar's a cool place, and i learned a ton there and made some good friends.<p>--<p>that said, my overwhelming impression of asset managers is that most capture more value than they add. fee-bearing mutual funds, family offices, financial advisors, hedge funds: few are worth their fees.<p>hedge funds, with their standard two-and-twenty fee structure, are especially bad. you could hardly design worse-aligned incentives, short of outright betting against your own clients.<p>two-and-twenty means 2% of assets under management every year plus 20% of any profit and 0% of any loss. why people agree to those terms is beyond me.<p>for example, running a strategy similar to a martingale, a negative-EV fallacy when done in a casino, can be incredibly positive-EV when you're a hedge fund manager. it produces streaks of above-market returns, where you keep doubling your AUM and rake in the fees, for however long that lasts.<p>when the crash happens, the managers walk away unscathed.<p>if you're interested in an entertaining story that starkly illustrates this dynamic, check out Long Term Capital Management.