Some of these investors, who are for the most part other hedge funds (that comprised approximately $1.3 billion of the original $2 billion of fund capital), have told me that they previously hedged a substantial portion, or in some cases 100% or more, of their exposure to Target through PSIV.
So a bunch of hedge funds invested in PSIV to go long Target (while paying Ackman his 2-and-20), and at the same time went short Target in order to hege their PSIV exposure. And for this piece of genius they charge their own investors 2-and-20.
Just think, if you invested in a fund-of-funds which invested money with say David Einhorn who in turn invested in PSIV, you could end up paying 1-and-10 on the profits after paying 2-and-20 on the profits after paying 2-and-20. But hey, if PSIV is down 90%, at least your performance fees aren’t going to be big.