Losing The Points

See: Carry.

You started the quarter in the hedge fund you manage feeling great about your profit participation. The market looked cheap, and it was about to turn. You felt very good about your more highly leveraged investments doing better than unlevered ones in this turn. You were up after week one almost 450 basis points on $100 million in AUM, or Assets Under Management. That's a gain of $4.5 million. Your profit participation is 20%, so you'd normally be clipping points of $900k.

But then the market (and everything else) sagged. You bet wrong. The $4.5 million in gain returned to zero and that $900k in points, or profit distribution, goes away...so you will have lost those points in your bonus dough.