Eric Falkenstein posted the following chart, which apparently comes from a book by Simon Lack, showing the real breakdown of hedge fund profits.

After fees and fund-of-fund fees, just 3 percent of profits end up going to investors.

Part of the reason for dismal returns?

The slaughter of 2008, which caused a total wipeout of real investor profits.

We can't verify the stats, and we suspect that measuring this stuff is pretty tough. But the general idea that the big money in hedge funds comes from running them, not investing in them, seems hard to argue with.

(Via Kevin Depew)