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Alternative Market Briefing

CalPERS leads fee pressure on hedge funds, but managers with solid performance have been able to hold the line

Wednesday, July 22, 2009

From Kirsten Bischoff, Opalesque New York:

With preliminary reporting of its 2008-2009 fiscal year performance Calpers made it clear that hedge fund managers will be seeing further pressure on fees. The pension plan, which saw assets decline 23% and targeted several ways the portfolio would look to strengthen itself. Second on the list of actions was the pension plan's commitment to revisit its arrangements with hedge fund and private equity partners seeking to achieve "...reduced fees, better alignment of interests, and more mutually beneficial long-term relationships." (Source)

The placement of this statement as one of the top priorities in CalPERS action plan to strengthen its portfolio makes it clear that institutional investors will be looking to use the strength of their size to cut fees on current and future hedge fund allocations.

Opalesque spoke with one CTA manager who said the debate over hedge fund fees is a topic that is always being discussed, but acknowledged performance in 2008 left many hedge fund investors wondering exactly what they were paying for.

While investors demand underperforming managers answer this question, those that outperformed in 2008 may in fact find their arguments for "2 and 20" fees have been bolstered. Strategies that proved to be n......................

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