Closed Financial Engine - Its not a fund , Or a platform , and not a theory
Chapter2
Its not a fund , Or a platform , and not a theory.
Something structurally different.
The argument begins here!.
The Intermediary That Never Loses, and the Misalignment Nobody Discusses
The 2-and-20 model was designed to align the interests between fund managers and their investors.
In practice, it guarantees that the manager earns, even when the investor loses.
Let me be precise with numbers:
A 2% management fee on $500M = $10M annually. Regardless of performance.
Carried interest only triggers above the hurdle rate.
But every dollar of drawdown (the entire drawdown) is absorbed by the LP alone
The examples are not rare:
Long-Term Capital Management lost $4.6B in weeks, and the management collected fees until the last day
Archegos Capital wiped out $20B+ from lending banks, and the manager walked without direct liability
European family offices lost 30–40% of AUM in 2008 (after years of paying management fees on the way up).
The problem is not manager integrity, The problem is the incentive structure itself: Upside is shared, and Downside is asymmetric.
Skin in the game is a pitch deck line (not a structural commitment).
Beyond misaligned incentives, there is a more fundamental structural gap: no entity in conventional institutional finance is purpose-built to carry
both the source of return and the source of risk within the same internal structure
Every tool depends on an external driver: The market. Demand cycles, Monetary policy, and Geopolitical conditions
Which means that when external conditions deteriorate simultaneously (as they did in 2008, in 2020, and in the rate shock of 2022) , every tool that depends on the same external driver moves in the same direction, And the intermediary still collects its fee
This is not an argument against institutional fund management, It is an observation that points toward a structural gap, and the gap between what sophisticated capital needs, and (what the existing architecture is actually designed to deliver)
That gap is, today, exactly where I am building!.
Something structurally different.
The argument begins here!.
The Intermediary That Never Loses, and the Misalignment Nobody Discusses
The 2-and-20 model was designed to align the interests between fund managers and their investors.
In practice, it guarantees that the manager earns, even when the investor loses.
Let me be precise with numbers:
A 2% management fee on $500M = $10M annually. Regardless of performance.
Carried interest only triggers above the hurdle rate.
But every dollar of drawdown (the entire drawdown) is absorbed by the LP alone
The examples are not rare:
Long-Term Capital Management lost $4.6B in weeks, and the management collected fees until the last day
Archegos Capital wiped out $20B+ from lending banks, and the manager walked without direct liability
European family offices lost 30–40% of AUM in 2008 (after years of paying management fees on the way up).
The problem is not manager integrity, The problem is the incentive structure itself: Upside is shared, and Downside is asymmetric.
Skin in the game is a pitch deck line (not a structural commitment).
Beyond misaligned incentives, there is a more fundamental structural gap: no entity in conventional institutional finance is purpose-built to carry
both the source of return and the source of risk within the same internal structure
Every tool depends on an external driver: The market. Demand cycles, Monetary policy, and Geopolitical conditions
Which means that when external conditions deteriorate simultaneously (as they did in 2008, in 2020, and in the rate shock of 2022) , every tool that depends on the same external driver moves in the same direction, And the intermediary still collects its fee
This is not an argument against institutional fund management, It is an observation that points toward a structural gap, and the gap between what sophisticated capital needs, and (what the existing architecture is actually designed to deliver)
That gap is, today, exactly where I am building!.
Tariq Alsaleh
#FamilyOffice #AssetManagement #GestiónPatrimonial
Address
Saudi Arabia - Riyadh