Quant Macro Investing

Risk Taking Disciplined

One Biz Model?

Wealth guy like Dell can use his own money as anchor money to attract new investors, and make money out of the process in addition to managing his own money.

MSD Capital, the manager of Michael Dell’s $10bn fortune, recently launched a new distressed debt fund open to outside investors that carries a three-year lock-up but with the promise that fees are reinvested over that period as well.

(FT) Hedge funds cling to fees

Posted by Gwen Robinson on Feb 26 04:46.

Only 10% of hedge fund managers expect to see their fees fall, despite recent underperformance that has sharply reduced income, according to a Credit Suisse survey. The industry suffered record outflows in 2008-09 but hedge funds still balk at the idea of cutting the standard “two and 20” fee structure, 2% of assets and 20% of returns, the poll found. However, the survey, which covered nearly a third of the $1,700bn global hedge fund industry, found that managers are open to negotiation.

Hedge funds shy away from lowering fees

By Sam Jones in London (Published: February 25 2010 )

Just one in 10 hedge fund managers expects to see the fees they charge investors fall in spite of recent underperformance that has seen income sharply reduced, according to a Credit Suisse survey.

The industry suffered its heaviest outflows ever in 2008-09 but hedge funds still balk at the idea of cutting the standard “two and 20” fee structure, 2 per cent of assets and 20 per cent of returns, that they charge clients, the poll found.

But the survey, which took in responses from nearly a third of the $1,700bn global hedge fund industry, found that managers are open to negotiation.

Two-thirds of respondents said that they were willing to bargain on fees if investors consented to longer lock-up periods and such deals have already begun to take place.

MSD Capital, the manager of Michael Dell’s $10bn fortune, recently  launched a new distressed debt fund open to outside investors that carries a three-year lock-up but with the promise that fees are reinvested over that period as well.

Theleme Partners,  launched his year by Patrick Degorce, a former partner at activist fund TCI, charges a proportional management fee that decreases as assets under management grow.

For institutional investors in particular, such structures are likely to be particularly attractive.

Calpers, the largest pension fund in the world, which has more than $5.9bn allocated to hedge funds, announced a review of its hedge fund relationships last year and has been placing pressure on managers to reform the way they charge, according to the funds with which it invests.

Meanwhile in the UK, Hermes BPK, which manages hedge fund investments on behalf of the BT pension scheme, has also been pushing for change and is itself to allow its own clients to claw back the fees it charges in the event of underperformance.

Such fee negotiations are all part of a longer due diligence period in which investors research hedge funds, according to Credit Suisse.

The bank’s survey also found that the average time spent by investors conducting due diligence has risen from 5.8 to 7.5 months.

While 41 per cent of funds of funds – the largest single class of hedge fund investor – previously spent three months or less conducting their due diligence, now just 9 per cent do, highlighting the particular pressure they have come under to demonstrate greater rigour in the wake of the Madoff scandal.

Hedge funds are also looking to meet the needs of investors keen for so-called managed accounts, which are segregated portfolios tailored to the specific needs of the account holder.

The survey found that 47 per cent of respondents already ran one or more managed accounts with a further 39 per cent saying they were investigating how to do so.


March 2, 2010 - Posted by | Hedge Funds

No comments yet.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: