Include cash while tabulating fee amount but exclude cash when calculating returns? Yes, that is logically bad practice. But, it artificially bumps up perceived returns to make the fund manager look good. Buffett has called out private equity managers for following such practice.

When I report our Student Investment Fund at Sacramento State performance, I do not exclude cash (I.e., we remain Buffett compliant). In fact, the Bloomberg PORT tool gives a great view on how being over or underweight cash relative to the S&P 500 has helped or hurt returns (spoiler: we have perpetually held too much cash and this has detracted from returns during this long bull market).

To me, it makes no sense to exclude cash when calculating fund returns. If an investor provides cash to a fund manager to invest, the investor is not paying the manager to sit on cash. Thus, performance should be inclusive of every dollar provided by the investor.

Be mindful my friends…

-Dr. Moore

Buffett Slams Private Equity Over Inflated Returns, Debt
https://www.bloomberg.com/news/articles/2019-05-04/buffett-slams-private-equity-for-inflated-returns-debt-reliance