If you could pick the best two predicators of an investment's success what would they be?
I would choose track record & incentives - give the right manager/promotor the right incentives.
Who is the right manager/promotor? Someone who has a proven track record in a specific niche investment arena and I trust after having met them. It is that simple.
What are the right incentives?
If you did compensate the promotor before the investment created profits, what incentives would you be giving that promotor?
An investment in which you pay fees, profits and costs from the initial investment (i.e. before the investment creates any profits) is called "front loading" ((http://www.investopedia.com/terms/f/front-endload.asp)).
How much does a "front loaded" investment have to make just so the investor can break even?
It is my opinion, and I think just good common sense, that an investor should always evaluate:
1) How much front loading is built into an investment? Keep in mind that promotors use very "creative" and often very deceptive names and accounting methods to hide those front loaded fees. That is one of the biggest challenges of reading and digging through legalese laden information to even get to what the real fees are.
2) How exactly does the promotor get compensated? Taking a monthly percentage of managed funds does give the promotor the incentives to keep the investors happy over the long term but it provides an immediate incentive to sell more investments irrespective of performance.
3) What is the promotor's track record? If you can't get direct and substantiated answers to this question, what is that telling you?
An ideal investment would have a promotor that has a very strong proven track record and a investment structure that compensates subject to performance.