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Alternative Market Briefing

Institutional investors to press for further reduction of management fees in hedge funds

Monday, March 07, 2016

Komfie Manalo, Opalesque Asia:

A survey by data provider Preqin showed that institutional investors will continue to press for further reduction in both management and performance fees in 2016 with performance proving challenging in 2015, and investor satisfaction with hedge fund returns failing to improve over the year.

"Approximately 14% of investors regard fees as the key issue facing the hedge fund industry going into 2016, making it the third most important issue behind performance and transparency," said Preqin in a survey of more than 500 hedge fund managers and institutional investors from around the world.

The poll added that many of the more high-profile exits of institutional investors from the hedge fund industry in recent years, most notably CalPERS in 2014 and Railpen in 2015, cited costs and fees incurred by investing in the asset class among the reasons for their redemptions, and therefore the perceived lack of value provided by hedge funds.

In recent years, the 2/20 fee structure, once synonymous with the asset class, has gradually given way to a wide range of terms of remuneration, reflecting the variety of fund types now available to investors in hedge funds and the high level of competition in the hedge fund market.

Preqin added, "We have seen a general downward movement of management and performance fees by year of inception. However, we did note an increase in mean management fees for ......................

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