Two and twenty

Two and twenty is shorthand for a common hedge fund fee structure, a two percent annual management fee charged on total assets managed, plus twenty percent of any investment profits the fund generates. The management fee is charged regardless of performance, while the profit share, sometimes called a performance fee or carried interest, only applies when the fund makes money.

The structure has been criticized for rewarding fund managers heavily even in years of mediocre performance, and fee pressure has pushed many funds toward lower rates over time.