As you know, most hedge funds are set up offshore, for tax reasons. One of the benefits is that managers can effectively defer income one year or more. This is a huge benefit, and one reason what many companies set up compensation deferral plans for their top executives. The common view now is that hedge fund managers are making enough money. So this tax advantage is being reviewed in Washington. Congress, of course, is looking to goose revenue. We may see some restrictions on deferred comp arrangements. But hedge fund managers will note that this in not a souped up 401(k). They can actually lose their deferred comp. If the fund has problems, their funds are up for grabs by creditors. So they are putting their funds at risk. Putting their own money in their funds isn't a bad thing at all.

For more:
- here's the New York Times article