Hedge Fund Fees Fall

Sep 9 2013 | 11:24am ET

Hedge fund fees are continuing to decline, beset by a variety of pressures that are making the famed '2 and 20' a thing of the past.

The average hedge fund charges 1.6% for management and 18% for performance, The Wall Street Journal reports. Goldman Sachs says investor levies are somewhat higher, at 1.65% and 18.3% as of last year, while Hedge Fund Research put the figures at 1.55% and 18.39% in the first quarter.

Equity hedge funds have had to cut fees most aggressively, with the average management fee at about 1.5%, according to Seward & Kissel. Commodity funds have also seen their average fees drop, while bond funds haven't felt as much pressure.

The reason may be simple: Stock and commodity funds haven't done especially well recently, while some debt funds employ complex—and expensive—strategies.

But underperformance isn't the only thing weighing on hedge fund fees. Increasing competition for smaller allocations among small and mid-sized hedge funds is fueling something of a fee-cutting war. More hedge funds are establishing hurdles they must clear before charging performance fees, while others are acquiescing to clawbacks.


In Depth

GSAM's Papagiannis: Liquid Alternatives For The Long Run

Apr 21 2017 | 8:44pm ET

Interest in liquid alternatives cooled a bit last year amid a broad shift in investor...

Lifestyle

Aston Martin Returns To Debt Market As DB11 Drives Turnaround

Mar 31 2017 | 5:21pm ET

James Bond’s preferred carmaker is returning to the public debt markets for the...

Guest Contributor

Debunking Conventional Investment Wisdom (Part II)

Apr 17 2017 | 5:56pm ET

The alternative investment industry is currently replete with buzzwords around data...

 

From the current issue of