Wed, Oct 26, 2016
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. M&A - U.S. hedge fund HarbourVest is shock winner in the £1.1bn SVG Capital takeover saga, Hedge fund Parvus shows hand, toppling William Hill merger deal[more]

    U.S. hedge fund HarbourVest is shock winner in the £1.1bn SVG Capital takeover saga From The fierce battle to buy Britain's biggest private equity group has come to an unexpected conclusion, with the original bidder walking away with the prize. SVG Capital has agreed

  2. Marc Lasry: Energy is still a phenomenal opportunity[more]

    From Distressed debt specialist Marc Lasry said energy debt is still a "phenomenal opportunity" because investors can get "massively overpaid" for the risk they take on. There are "huge opportunities" in the energy sector especially in restructurings, the Avenue Capital Group CEO said Tues

  3. Opalesque Exclusive: Ex-SAC manager re-emerges with market neutral hedge fund[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: A manager re-emerged from the SAC battleground last year to launch his own hedge fund under the umbrella of New York-based investment firm Endicott Group.

  4. North America - Hedge-fund manager Kyle Bass says the U.S. is on track for stagflation, Billionaire hedge fund titans Dinan, Lasry on election, markets and best investment ideas[more]

    Hedge-fund manager Kyle Bass says the U.S. is on track for stagflation From Kyle Bass, founder of Hayman Capital Management, on Wednesday warned that the U.S. is headed toward so-called stagflation. Stagflation is typically described as persistently high inflation and hi

  5. David Einhorn speaks on passive investing, Mylan, his cheapest stock, the Fed[more]

    From Greenlight Capital hedge fund manager David Einhorn (Trades, Portfolio) joined nine other famed investors on Tuesday to talk about stocks at the annual Great Investors’ Best Ideas Investment Symposium in Dallas. Presenters at the annual conference typically pitch one or severa