Twenty percent of profits is the common figure in hedge funds, with variations running from 10% to 30%. Some regulated funds cap the rate or require the fee be calculated against a benchmark rather than against zero.
The structure is an option, not a symmetric partnership. The manager participates in gains but does not refund losses, which makes the fee more valuable to them as volatility rises. Protections exist for this reason: a high-water-mark prevents charging twice for recovering the same losses, and a hurdle-rate makes the fee payable only above a threshold return.
Crystallisation frequency matters more than the headline rate. Fees taken quarterly on a volatile track record can exceed fees taken annually on the same return path, because each quarter's gains are charged without netting the next quarter's losses.
Related: high-water-mark, hurdle-rate, two-and-twenty, management-fee, carried-interest, hedge-fund