Alternative Market Briefing

New York Roundtable: New hedge fund fee models emerge but two-and-twenty won't disappear

Tuesday, June 30, 2009

From the Opalesque Team:

At the recent Opalesque New York Roundtable, Chris Acito, founder of boutique consultancy firm Acito Advisory Group, painted a straightforward picture regarding the perceived collapse hedge fund and FoHFs fees which he described as “greatly overstated.”

“Sure the structure of fees may change quite a lot: longer horizon performance incentives, clawbacks, new benchmarks, etc. But in terms of the gross amount of money that a manager could earn if he does really well, I don't see that changing a lot,” Acito said.

Fee discussion has become emotional

Bill Geisler of hedge fund firm Malbec Partners added that he and his team "worked hard for that positive return in 2008 and I wouldn't want someone to cut our fees because the majority of managers misunderstood the systemic risk brewing in the credit markets." The issue of fees would be an emotional one and "as the emotion leaves and logic prevails, I believe people will continue to pay someone well who can protect the downside, make money in bad and good markets, but they will not pay for beta."

Geisler also explained that clawbacks would not be an issue for him: "I feel like if I had made a lot of money for a client and then gave it away, there is no reason I should be paid on that basis. "

Tim Schuler, investment strategist for FoHFs firm Permal Asset Management, advised investors to......................

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