At Greenline Partners, we leverage many invaluable lessons from our experience at the world’s largest hedge fund—not just about effective investing, but also about avoiding costly mistakes.

One of the biggest lessons learned was the hurdle that high fees and tax inefficiency pose to earning good returns. Ironically, many hedge funds and private equity strategies struggle to outperform index funds when you account for these factors.

When investing for the long-term, the stark difference between low fee, tax efficient strategies and the opposite (high fee, tax inefficient) becomes clear. The chart below illustrates how $1 million invested over 40 years turns into $30 million for the index investor, but only $3 million in hedge funds.

In 2013, we wrote a paper titled "Hurdle Rate for Active Management," which remains relevant today.

Please reach out if you would like to read the full paper.