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Alternative Market Briefing

Despite pressure from investors to lower fees, 35% of hedge funds still charge 2&20

Friday, September 23, 2016

Komfie Manalo, Opalesque Asia:

Amidst falling performance and high-profile redemptions, investors have increased their pressure on hedge fund managers to bring their management and performance charges below the 2 & 20 'industry standard', data provider Preqin said.

Based on its latest study, Preqin said that 35% of hedge funds they tracked currently charge both a 2.00% management fee and a 20.00% performance fee, and average fees have fallen over recent years. In 2016, the mean management fee is 1.57%, while the mean performance fee is 19.29%. Furthermore, among the most recent funds these fees are lower still: Funds launched in 2016 have, on average, a 1.53% management fee and a 19.13% performance fee.

Amy Bensted, head of hedge fund products at Preqin, commented, "The hedge fund industry has now seen an extended period of lower performance, and four out of five investors recently stated that their hedge fund investments had not met their expectations in this area. In these circumstances, it is not surprising that increasing scrutiny has been paid to the fees that hedge funds charge – especially in the wake of some high-profile investors citing fees as a factor in them reducing or liquidating their hedge fund portfolios. More than half of investors surveyed by Preqin have mentioned both management and performance fees as areas in need of improvement, and a high proportion currently feel that their int......................

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