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Tuesday, January 21, 2020

Hedge funds seen lowering fees - Watson Wyatt


Date: Monday, November 24, 2008
Author: James Molony, Thomsonimnews.com

With hedge funds struggling to hold on to capital there are signs of managers becoming 'more flexible' over fee negotiations.

LONDON, Nov 24 (Thomson IM) - Global hedge funds hard hit by the credit crisis are becoming more open to offering lower fees to institutional investors amid diminishing returns and assets under management, investment consultant Watson Wyatt said on Monday.

In the first 10 months of the year hedge fund losses have reached 15.48 percent, according to Hedge Fund Research. In October investors pulled $40 billion out of hedge funds with further outflows expected during the rest of the year.

The industry has shrunk to $1.56 trillion from its peak of over $2 trillion last year, according to Hedge Fund Research.

With hedge funds struggling to hold on to capital there are signs of managers becoming 'more flexible' over fee negotiations, Watson Wyatt said.

Craig Baker, the firm's global head of manager research, said, 'Fees are generally still too high for the value they deliver, particularly as we enter a lower return environment.'

Performance fees, whereby the hedge fund manager charges 20 percent of returns made above a certain level, have been 'poorly designed and tipped in managers' favour,' he said.

'For a number of years we have been trying to rectify this situation and negotiate a fairer deal on fees, but only now are we seeing real progress,' Baker said.