"Hedge fund managers typically have a substantial amount of their own capital invested in the funds they manage, and a significant portion of their compensation is based upon the absolute, or positive, performance they achieve for their investors. As New York Attorney General Eliot Spitzer observed recently, the interests of hedge fund managers and their investors tend to be "aligned", largely due to this combination of the managers' commitment of capital to their funds and the performance-based compensation structure."

https://www.sec.gov/spotlight/hedgefunds/hedge-mfa.htm