It's most common for people to put up less than 20% of the fund's capital in the early years... But, over time, since
the Principal's money grows faster than his investors', it wouldn't be unusual for a Principal to have more than 20% of the fund's total capital.
Note that I saw performance fees as high as 50%.... so instead of 2 and 20 - this guy was 2 and 50. Pretty crazy.
Why would you give some guy 50% of the upside??? The only reason that makes sense to me is that you know the guy is paying for insider info and so you feel it's worth giving him half of the upside. You get the benefit of the insider info, but don't risk going to jail.