I agree that for an active extension long/short strategy, a performance fee using absolute performance as a hurdle is poor practice. I suspect they would be attempting to justify it on the basis that capital preservation is a core objective. But it's a poor structure on a peer relative basis. I guess the only factor that offsets it somewhat is the fact that the managers are reinvesting the proceeds, so at least it is 'at risk' for them. Cold comfort to investors, but better than I've seen anyone else do!
