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Alternative Market Briefing

GAIM delegates hear fund of funds fees are increasingly discounted

Wednesday, June 19, 2013

Beverly Chandler, Opalesque London: Reporting from the GAIM conference in Monaco, CooConnect finds that funds of funds are taking action over their fees.

The site writes: "Funds of funds have insisted they are becoming more aggressive at pushing down hedge fund fees despite a recent Goldman Sachs prime brokerage survey indicating a majority of investors still paid full fees."

According to the Goldman Sachs study, 83% of investors paid full fees, while 68% of pension funds – historically the most vocal investor constituent on fees, paid full or non-negotiated fees. Funds of funds, said the study, were the least effective investor class at negotiating reduced management fees. Meanwhile, international law firm Seward & Kissel revealed 90% of investors paid the full 2 and 20 on all non-equity focused hedge fund strategies.

Nonetheless, COOConnect writes that several funds of funds told GAIM delegates in Monte Carlo that their underlying managers were increasingly open to offering fee discounts. "Managers have become more willing to reduce fees, particularly in this low interest rate environment. If we are an early stage investor, we will sometimes pay the full 2 and 20 initially, and if the manager reaches a threshold of $150 million, for example, we will ask for our fees to be cut, sometimes by up to half," said Alex Campbell, investment manager at Culross, the $500 mill......................

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