Sat, May 30, 2020
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
New Managers February 2020

PERSPECTIVES: Evolution of shrinking hedge fund fees - what do investors and managers need to know?

 

Evolution of shrinking hedge fund fees - what do investors and managers need to know? Hedge funds fees remain under extreme pressure across the industry. This strong trend is driven by declining return expectations from investors, increased competition across the industry, and an increasing share of industry assets controlled by large institutional investors. Back in 2009, most hedge fund investors took meetings with hedge fund managers they thought had the ability to generate mid-teen returns. Today, historically low interest rates, tight credit spreads and high equity valuations have largely dampened expected returns to high single digits. As a result, many investors believe that the fees historically charged by hedge funds now represent too large a percentage of their gross performance. A recent Eurekahedge survey on North American based hedge funds noted that the average management fee has declined to 1.26% and the average performance fee has declined to 14.81%. The results of this survey raise two very important questions:

1. If these survey results accurately reflect the average fees, are these the fees paid by most hedge fund investors? 2. How can investors take advantage of changing fee structures to generate better investment results? Does the average investor pay the average fee? Twenty years ago, all investors generally paid the same fee, regardless of allocation size. Today, most funds will provide a significant fee discount to large allocators. While the definition of 'large' varies by firm, it typically starts in the range of $25-100 million. Very few hedge funds have reduced their fees for current or future investors allocating $25 million or less. While those investors have seen a slight decrease in fees, very large allocators (over $100 million) have seen fees decline as much as 25% to 50%. Allocation size has caused a large divergence in the range of fees paid by investors and is responsible for a vast majority of the decline in reve......................

To view our full article please login

This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.
New Managers
New Managers
New Managers

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Tiger Global tops the list US-based venture capital market[more]

    Laxman Pai, Opalesque Asia: Tiger Global Management holds on to its position as market-leader in US-based venture capital, said a study. According to Preqin, the closure of tech-focused Tiger Global Private Investment Partners XII in January means the New York-based firm has raised more than

  2. Investing: Singer bets on Europe, emerging markets, Britain's unhealthy appetite for financial risk in essential services, How Stan Druckenmiller shook up his portfolio[more]

    Singer bets on Europe, emerging markets From Investment Magazine: William Blair's Brian Singer is looking to invest in Europe and the emerging markets as the recovery from the global economic shutdown to contain the pandemic will likely take longer than what the market has priced in.

  3. PE/VC: How Covid-19 could reshape private equity fundraising, The private equity bet that coronavirus cut short[more]

    How Covid-19 could reshape private equity fundraising From Asian Investor: The pandemic looks may have led to greater use of remote capital-raising but might it also encourage investors to establish more overseas offices? The coronavirus outbreak has inevitably hit the amount of mo

  4. Investing: Millennium hedge fund ups bet against Bank of Ireland, Value rotation was the last thing big funds thought would happen, Al Gore's firm sold Amazon and Microsoft stock. Here's what it bought.[more]

    Millennium hedge fund ups bet against Bank of Ireland From Independent: US hedge fund Millennium International Management has raised its bet against Bank of Ireland's shares. It comes as Davy says 2020 will be a write-off for banks, with losses across Irish lenders of €4bn. M

  5. PE/VC: Private equity in the Covid-19 crisis, Carlyle's Africa dealmakers leave to start their own buyout firm, UK asset managers plan shift to off-market strategies including private equity[more]

    Private equity in the Covid-19 crisis From Morning Star: Private equity investment trusts invest in unquoted companies not yet listed on the stock market. How have they fared in the sell-off? Investment trusts have been caught up in the market turmoil of recent months and private equit