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Mid-Size Hedge Funds Face More Costs

Date: Friday, November 19, 2010
Author: Seth Fraser, HedgeFund.net

Mid-size hedge fund managers pursuing institutional investors may be underestimating the challenges and costs associated with competing for clients, according to a new survey.

Consulting service firms McGladrey and Greenwich Associates surveyed mid-sized funds with assets under management between $100 million and $500 million.

Two thirds of the hedge funds participating in the study said prospective investors are asking for more detailed information on issues like transparency, fee structure, liquidity and tax efficiencies.

McGladrey partner Alan Alzfan told HedgeFund.net that fee structures are increasingly on investors’ minds.

“Mid-sized investors are altering their fee structures in order to keep a two-year lockup periods,” Alzfan said.

One fund manager responding to the survey anonymously said, “We now have an option to either take no lock-up and a 1.5 and 20, a two-year lock-up with 1.5 and 15 or a three-year lock up with 1.5 and 10. The three-year lock up has a three-year look-back as well.”