Keep in mind that the 2% is there to cover the expenses of the firm and its trading costs.  The 20% is the real incentive for the fund managers.<p>Also keep in mind that they only get that if they earn more for the investors than the &quot;hurdle rate&quot; which is an agreed upon metric for return.<p>Quite literally, they only get paid if you do very well in the markets.   For every $10 that they grow your money, they keep $2 and you get $8.