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Benedicte Gravrand, Opalesque Geneva: Swiss bank Credit Suisse recently said that more than two thirds of hedge funds are below their high water marks. This means most of them are not getting their 20% fee on performance.

Almost all hedge fund performance fees include a high water mark, which means that the performance fee only applies to net profits (i.e. profits after losses in previous years have been recovered). Sometimes, fund managers close a fund that has suffered serious losses and start a new fund, rather than trying to recover the losses over a number of years without performance fee.

"Credit Suisse calculates that 13% of hedge funds have not earned any incentive fees since at least 2007," said the FT last month. "Most of these are small funds with assets of less than $100m, which struggle to retain staff without the income available from performance fees." However, Credit Suisse finds that hedge fund sentiment has started to improve this year.

According to The Economist, Boyer Allen, a London-based hedge fund manager, "faced the prospect of spending the next few years trying to claw its way back to pre-crisis asset levels. Instead the founders decided to shut the fund and give investors......................

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