Mon, Sep 26, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Other Voices: The hedge fund fee conundrum

Monday, June 02, 2014

This article was authored by Andrew Beer, founder of Beachhead Capital Management LLC in New York.

By one estimate, the hedge fund industry managed $2.6 trillion in capital at year-end 2013. Many expect growth to accelerate over the coming five years as institutional investors like US pension funds seek alternatives to investing in low yielding fixed income assets. Deutsche Bank, for example, predicts that industry assets will grow by another $400 billion this year alone.

This growth comes in the face of widespread discontent about the cost of investing in hedge funds. In the pre-crisis period, when hedge funds routinely outperformed traditional assets, the cost of investing was largely overlooked. In recent years, though, as the average hedge fund delivered single digit returns, high fees increasingly have come under scrutiny. To put the issue in context, investors paid approximately $95 billion in fees in 2013, or 44% of what their investors took home. By our estimate, this figure is twice what it should be: in other words, investors overpaid by a staggering $47 billion. The same conclusion can be drawn for each year since the financial crisis.

Why is this? In the post-crisis period, institutional investors and their consultants partially brought down the cost of investing by "dis-intermediating" funds of hedge funds – in essence, cutting out the middleman. However, this represented o......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. North America - Acela fight splits hedge fund Connecticut and old money enclaves[more]

    From Bloomberg.com: Connecticut’s residential coastline is two worlds, the one of newcomer millionaires and one whose wealth and New England roots span generations. Now, their differences over a rail route threaten to gum up plans for the U.S. Northeast’s fastest-ever trains. About 30 miles from Man

  2. Activist News - Caesars offers creditors another $1.6bn, would spell end of hedge fund ownership, Activist investors double chance of CEO exits[more]

    Caesars offers creditors another $1.6bn, would spell end of hedge fund ownership From Calvinayre.com: Casino operator Caesars Entertainment has improved its offer to junior creditors to over $5b, but the offer is only good until Friday. On Wednesday, Caesars added an extra $1.6b to the $

  3. Opalesque Exclusive: Modern investor tools (2): A platform that does the job for you[more]

    Benedicte Gravrand, Opalesque Geneva: A new series on technology providers that assist asset allocators. There is disruption in the investor part of the world of hedge funds, coming from platforms that can replace traditionally-run search and analysis. Here is one of them. L

  4. Hedge funds saw four consecutive months of outflows in August, but assets still up by $17.6bn YTD[more]

    Komfie Manalo, Opalesque Asia: Hedge funds witnessed four consecutive months of outflows with investor redemptions totaling $23.8bn as of end of August, data provider Eurekahedge said in its monthly report. But total hedge fund assets grew by

  5. Trend reversals lead to losses as managed futures drops 1.52% in August[more]

    Komfie Manalo, Opalesque Asia: Trend reversals in August have led managed futures traders to lose 1.52% last month according to the Barclay CTA Index compiled by BarclayHedge. The Index is up 0.62% year to dat