Fee Squeeze: A Tale of Two Greeks
Jul 10th, 2007 | Filed under: Investment Management Fees
When it comes to fees, it’s the best of times and the worst of times for hedge funds - depending on their alpha and beta.
The Financial Times provides a good overview of this phenomenon in a story last Monday. We haven’t always agreed with the FT’s view of the hedge fund industry (see related posting). But Alphaville, FT’s excellent blog-esque news service, has made up for it by enthusiastically welcoming opposing views. Says the recent FT piece:
“Who cares when it is surely the total returns that really matter? Well, it is all about fees. Genuine alpha is worth a lot to return-starved investors. It certainly merits the standard 2/20 fee structure, and the best funds charge substantially more. Beta, on the other hand, is a commodity item worth only a few basis points.”
The article comes to a dire conclusion for hedge funds:
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