If you think that the past 12 months have had any impact on the "2/20" hedge fund pricing model, please say hi to the Easter Bunny for me.
According to Bloomberg News, reductions from the 2% fee based on assets under management and 20% of investment gains aren't coming anytime soon. Further, the hedge fund community will only trade money for other advantages -- such as longer lockup periods and high minimum commitments (e.g., of at least $100 million).
And, it's worse if the fund is a top performer. After all, why change if you're making money? It seems that there's nothing quite like results for shutting up limited partners.
Take SAC Capital Advisors LP (i.e., Steven Cohen's hedge fund, with $14 billion under management) ... or Och-Ziff Capital Management Group LLC ($20 billion under management) ... or HighBridge Capital Management LLC ($23 billion under management). They haven't cut performance fees at all, and any willingness to do so would come with a three-year lockup period. In the case of SAC Capital, the price cuts wouldn't begin at 2/20, as the fund charges 3% of assets under management and half of all investment gains.
The hedge fund industry currently has $1.43 trillion in assets (as of the end of Q2 2009), down from $1.9 trillion a year earlier. Last year, fees paid by investors sank to $25 billion from $55 billion the year before, mostly as a result of market performance, which hit gains hard and in some cashes caused asset bases to constrict. If all goes as planned this year, hedge fund fees could bounce back, reaching $45 billion.
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Reader Comments (Page 1 of 1)
8-03-2009 @ 3:02PM
Jason said...
Investors know the terms before they invest. What's the problem here?