Comment: “Premium” Hedge Fund Fees
Jan 30th, 2007 | Filed under: Investment Management FeesInstitutional Investor’s Daily ii reports today on a story at Financial News Online about hedge funds that charge more than the regular 2% management fee and 20% performance fee. According to Financial News Online, over half of these premium-priced hedge funds underperformed the average of “their cheaper peers” and most underperformed the S&P. Reports Daily ii:
“Calling such behavior ‘irrational,’ one private banker told FN that well-heeled investors take a certain amount of pride being associated to big name funds, regardless of performance. ‘They use the word ‘vintage’ to describe the year in which they became an investor,’ said the banker. ‘It is just as they have bought a fine wine.’”
The unstated conclusion of this article is that investors should avoid high priced funds. We’re not saying hedge fund managers are altruistic with regard to pricing, but before the flood of new ”hedge funds charge too much” stories, we wanted to make a few observations:
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