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From Sagar Chakraverty, Opalesque Asia:

“In Brazil, funds still have the same fees from those days when interest rates were 20% a year (2005-06), and now they are half of that (Selic rate 9.5% from 28-April), and the fees are still ‘2 and 20’, which seems high. Do you see fees changing in Brazil? ”

This question was raised by George Wachsmann, founding partner of Brazil’s BAWM Investments, a multifamily office with over $1bn under advisory, at the recent Opalesque Brazil Roundtable held in April-10 in Sao Paulo.

Since the 2008 crisis, many offshore fund managers have adopted a more investor-friendly approach by lowering the management fee to attract more capital. However, Brazilian managers have not really followed this trend and are still adhering to the traditional fee structure of 2% for management and 20% on profit.

Fees is not a function of interest rate Countering what Wachsmann said, Andrι Lion, one of the partners at BRZ Investimentos, a $2bn asset management company in Brazil, explained that the fee structure should be independent of the interest rate. Rather, it should be dependent on the alpha producing ability of the managers.

He said: “When we look at the independent managers who aim to deliver alpha every year, it is more than fair to charge ‘2 and 20’.”

The existing ‘2 and 20’ fee structure becomes questionable only when manager......................

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