Guest columnist Diane Harrison looks at the future of hedge fund fees.
Investment Management Fees
Charles Skorina speaks with Curtis Loftis, Treasurer of South Carolina about investment fees.
The question in 2012 is not whether hedge funds (and other alternative investment vehicles) can attract pension funds, but how they should go about it. Alternatives managers will benefit most from the heightened interest of pension funds if they address the continuing concerns of their pension fund colleagues. For example, pension fund managers are well aware that investment in exotic and illiquid products is something hedge funds do, and they know that these products can help make a quick exit impossible.
Data on the endowments of institutions of higher learning shows a significant spread between the performance of the largest endowments and the lagging performance of the smaller. The return that endowments received on their use of alternative strategies, too, depends in part upon the size of the endowment doing the investing. Endowments under $25 million in assets under management made only 9.5 percent on this asset class in FY 2011, while those with more than $1 billion in AUM made a 16.9 percent return hunting in the same jungles.
There are high hopes that the new UCITS framework that took effect in July could herald rationalisation amongst Europe’s regulated hedge funds. While tax factors could slow down the process, UCITS has plenty of other growth drivers besides cost savings.
Fees for alternative investments, particularly for private equity, are a long-standing issue that likely will never be resolved, but investors and managers alike keep trying, according to a recent survey by Preqin.
Institutions continue to favor alternatives as they remain committed to diversifying away from traditional asset classes. The problem, according to Towers Watson's latest survey, is that they aren't necessarily sold on hedge funds, and they certainly aren't thrilled with the price point.
Clients, according to a surprising new report, aren't too keen on alpha at the moment.
Everyone is talking about how institutional investors are beating up hedge fund managers on fees these days. But it seems the empirical evidence suggests otherwise. In fact, dropping fees may be the worst thing a hedge fund can do after a rough patch.
A new academic paper suggests managers open and close their funds to new investments to keep performance up - and to keep fees flowing in. We wonder whether hedge fund champion John Paulson would agree.
Wondering how much of the pie really goes to the manager? Read on.
Think hedge funds face an uphill battle on fees? It turns out that mutual funds may actually have it worse.Sep 2nd, 2010 | Filed under: Academic Research, Investment Management Fees, Today's Post
Hedge funds are used to taking their lumps when it comes to fees. But at least one noted academic says the mutual fund industry actually has a far bigger problem on its hands.
Report: Median performance fee earned by UK mutual funds that have one is, well, not really an issueAug 29th, 2010 | Filed under: Hedge Fund Regulation, Investment Management Fees, Today's Post
A new report by Lipper examines the early impacts of the UK's endorsement of performance fees for mutual funds.
Contrary to popular opinion, research shows that HF managers won’t necessarily go “all-in” to win bigAug 19th, 2010 | Filed under: Academic Research, Investment Management Fees, Today's Post
Apparently, executives outside of Hedgistan could benefit from mimicking how hedge fund managers get compensated.
Performance fee arrangements can be a dog's breakfast.
The debate over whether hedge funds are worthy of the management and performance fee structures they charge will likely live on in perpetuity, but a recent in-the-flesh pow-wow on the topic has raised some interesting angles on whether hedge funds are worth the price.
Like the ubiquitous volcanic ash cloud story, the hedge fund fee story kind of floats around for a while, then reemerges without warning to steal the headlines.
Sure, pension funds always want to pay lower investment fees. But a new survey reveals that many feel they are getting more value for money now than last year.
An academic study finds that the presence of a high water mark can induce the kind of loyalty usually forced upon investors with redemption gates.
Still more evidence that hedge fund managers aren't going to climb back above their high water marks for the foreseeable future. The question is how much longer managers will be willing to tough it out.
Investors will still cough up for alpha if they think they can get it, but aren't going to be as tolerant paying for beta anymore.
According to experts, a case currently before the US Supreme Court will "define the contours of a mutual fund adviser’s fiduciary duty with regard to compensation." Will it impact hedge funds too?
The debate over hedge fund fees is almost as old as hedge funds themselves. It remains to be seen whether the latest market collapse actually leads to a new pervasive fee structure.
Can some investors be "fooled" into buying new and unproven private equity funds?
Now the performance fee holiday doesn't have to end just because you sold your losing hedge funds.
Although newly emboldened investors seem to be pushing fees below the mythical "2 and 20" level, research has shown that fee pressure has been at work in the hedge fund industry for some time.
Do premia and discounts on closed end hedge funds actually reflect anything about the funds themselves or do they just a response to exogenous factors?
Retail mutual funds have been researched in every conceivable way. But we were surprised to learn that institutional mutual funds haven't undergone the same level of scrutiny. Until this year.
If hedge funds are supposed to be so unique, then why do most closed-end HFs sell at a discount or premium to NAV at the same time?
Like water in a bathtub, assets seem to slosh in and out of the hedge fund industry frequently. Unfortunately for investors, this can scrub under-performers clean of their requirement to provide a performance fee holiday.
Most calls for hedge fund fees to change have fallen on deaf ears. But here's one that we think might actually fly.
With a new calendar year re-setting the performance fee "clock", the topic of hedge fund fees is once again on the agenda. And history suggests that fees will also be on the agenda for years to come.
If a penny saved is a penny earned, then a basis point saved is also a basis point (of alpha) earned. So fees obviously matter. That’s why consultancy bfinance recently polled institutional investors on their feelings about investment management fees. To the sure disappointment of funds of hedge funds, the firm found that 60% of [...]
A majority of hedge funds are below their high water marks as we start off 2009. This should make for an interesting year since, in most cases, only the existing investors will enjoy a performance fee holiday.
For years, hedge funds have enjoyed pricing power. The second half of 2008 has changed all that and has ushered in an era of not just lower, but "differentiated", fee structures.
Hedge fund fees are often accused of being too high and too unresponsive to client or market pressures. But difficult periods - such as 2008 - show how the hedge fund fee model actually benefits investors.