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Alternative Market Briefing

Hedge funds ready to negotiate management fees rather than performance fees

Monday, September 23, 2019

Laxman Pai, Opalesque Asia:

Research into the attitude of hedge fund managers towards negotiating lower fees has found that they are more likely to negotiate management fees rather than performance fees.

About 38.8% of the hedge funds covered by the research were willing to negotiate their management fee, but just 11.3% would negotiate the performance fee, said a report by eVestment.

The new report new State of Institutional Fees Report: Hedge Funds, measured 180 recent hedge fund investments by 50 U.S. public pension plans.

The size of the investment made in a hedge fund also impacted the amount and type of fee discounts hedge fund managers were willing to negotiate, according to the report.

The report provides an overview of stated and negotiated fees from a sample of 180 recent hedge fund commitments made by 50 U.S. public pension plans tracked by eVestment Market Lens.

The report offers investors and fund managers a look at how fee negotiations tend to go so all parties can reach mutually beneficial outcomes without investors paying too much or fund managers leaving money on the table.

The most common management fees were 1% (for managed futures and funds of hedge funds), 1.5% (equity and multi-strategy funds) and 2% (fixed-income funds). Event-driven/distressed and macro funds charged 1.5% and 2% with the same frequency.

The most common agreed-upon performance fee among all direct hedge funds was the oft-referenced 20%; for funds of hedg......................

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