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New Managers March 2013

Focus - Time to take a second look at your fee structure?


Hedge fund fees are much talked about these days and usually subject to condemnation. Indeed, lukewarm hedge fund returns since 2008 have prompted observers to decry their high fees.

To quote an example, Forbes recently wrote: "In 2012, prominent hedge fund managers made headlines by successfully trading against JPMorgan Chase & Co., spending lots of money to influence the U.S. presidential election, and proclaiming that a nutritional supplements company was operating a pyramid scheme. While they made plenty of noise, very few of these traders managed to beat the U.S. stock market after charging their investors rich fees." And The New York Times observed: "In September 2012, the average hedge fund still charged 1.6% annually in management fees and collected 18.7% of any gains, according to data provider Preqin. Through November of that year, the average global hedge fund investor earned just 2.6%, according to ... Hedge Fund Research. In 2011, investors lost nearly 9%. The average annual return from 2009 to 2012, supposedly recovery years following the losses of more than 20% in 2008, was a measly 3%."

George Soros

Hedge fund honchos are critical too. George Soros, who does not need an introduction, said during the recent World Economic Forum in Davos that hedge funds cannot beat the market partly because there are so many of them and also because their fees are eating into their profits. Cliff Asness, founder of qua......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.
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