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Komfie Manalo, Opalesque Asia:

According to Ela Karahasanoglu, principal and a senior manager research consultant in at Toronto-based Mercer’s Alternatives Boutique, many hedge fund managers are now discussing different fee structures for different volatility levels. The volatility-based management fee is now gaining grounds, she said.

She explained during the latest Opalesque Canada Roundtable that in some instances, when volatility is lower, some fund managers are willing to give more concessions to keep their investors interested, as investors now think about how much they want to pay per unit of volatility.

Karahasanoglu said that the fee model "does make a difference. With a higher performance fee, the risk adjusted returns won’t really change, but if you're looking at the management fee for a manager that delivers a volatility of 5% versus 10%, that same management fee is going to have a very different impact on your risk-adjusted returns."

She acknowledged there is a general consensus amongst the hedge fund industry to reduce the fee structure as fund managers are now more flexible. The flexibility in the fee structure has seen some managers charging a flat management fee as an alternative to management/perf......................

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