good ole american way...
These investment advisors and hedge fund managers can take advantage of this tax structure because they are often compensated through a scheme that, in part, pays them according to the returns on the fund. The industry standard for hedge fund managers is “two and twenty,” which is shorthand for an “overhead” fee of 2% of capital under management plus carried interest (often called a “carry”) of 20% of the returns on the fund. Thus a $100 million fund earning 20% would pay its fund manager $2 million for overhead and $4 million in carry. The carry portion of their compensation is treated under the tax code as capital gains for the fund manager and is taxable at the much lower capital gains tax rate of 15%.