Mr. Wagner, no one enjoys your company more than I do. Today Wags is meeting a big client. His goal is to keep the client invested in Axe Capital and maintain the level of fees at 2 and 20. How would this seem looking real life? And how can we help Wags entangle this situation? The shake will not see the value that I'm paying above market. 2 and 20 is standard. 2 and 20 means 2% management fees. 20% performance fees. This is how the fee structure looks for Axe Capital. They get to percent whatever the performance and take a share of the upside. Was standard. Not for an investment the size of us. I have to agree it used to be standard, but it's no longer the case. In practice, there is a downward trend. In fact, Axe Capital has already evolved. In season one, we hear Axe a road saying, our investors pay us a 3% management fee and 30% of their profits. And you want me to tell them we're buying some fucking apple? In 2020, average management fees for new funds were 1.36%. Performance fees were 17.97. It doesn't matter if it's a swole as dirt digler in this first night with roller girl. This is one of those rare cases where size doesn't actually matter. Despite what Wags says, the size of the investment doesn't matter. It's actually what matters the most in the negotiation. Overall, I would say that although Wags dialog is outrageous, the fee conversation is realistic. To Bobby Axe around fees are religion and money is his God. This makes him the perfect shepherd for you in the material world. So you might want to get me in front of your boss. Sadly, that will never happen if two in 20 is your sticking point. How do we solve this deadlock? This is getting heated, which between friends is not right. Now, that's all cool off. While we're cooling off, let's find more elements to negotiate on. There is the lockup period. It's how long before the client can pull its money out. In a traditional fund, there is no such thing but with hedge funds, it is a normal close. It is typically up to 90 days, but a sovereign wealth fund could have a much longer time horizon and could stay for years. Then there are hurdle rates. The performance fee is usually calculated annually. If the performance was negative, it is zero. But what if the following year, it goes back to its initial level? There should be no fee either and that's what hurdle rates are for. The hurdle rate can be a high watermark, meaning the fund has to keep rising. Or it can also be a fixed rate, so instead of saying. Don't even fucking think of dictating the fees for hard. Wags could suggest a much longer lockup period. And if he's certain about the future returns, he could say we won't get paid if there is no performance because the fund has a high hurdle rate. Here is how the new payoff would look like with an 8% hurdle rate. Pick this up tomorrow. In the meanwhile, I am hopeful that in the spirit of friendship, our nighttime plans remain on. If the Kadeer guy was really on top of his game, he could quote a recent research showing that fees are actually much higher than what the contract states because of hidden fees. Oh, like Shaka Khan. Shaka Khan. Shaka Khan. Shaka Khan. Let me rock it. Let me rock it. To conclude, research shows that large investors now have increased power to negotiate with hedge funds. For Axe Capital, that leaves them exposed to a competitor that would adapt to what this client really needs.