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

Delayed Flash Crash Arrest Highlights Difficulties Detecting Fraud

Apr 23 2015 | 7:19am ET

The five years it took regulators to bring high-profile charges against a UK trader...

Lifestyle

Puerto Rico Woos The Rich But So Far Gains Little

Apr 17 2015 | 2:45am ET

Hedge fund manager Rob Rill grins. He has just had word that U.S. financial regulators...

Guest Contributor

Opportunities Ahead: Asian Fixed Income and Currency Markets

Apr 24 2015 | 6:18am ET

For hedge funds focusing on Asia, the policy uncertainty, unclear interest rate...

 

Editor's Note