Preqin: Institutional Investors Want Further Fee Concessions

Feb 26 2015 | 10:23pm ET

The majority of institutional investors in alternative assets feel the fees they pay must be further modified if their interests are to be better aligned with those of fund managers, according to a new survey released by industry data provider Preqin. 

Of the five major alternative asset classes – hedge funds, private equity, real estate, infrastructure and private debt – investors in four of them named management fees as the area that needed the most improvement in terms of aligning interests. In the fifth, private debt, fees came second after capital contributions by fund managers. 

Preqin surveyed a geographically diverse group of 440 institutional investors in alternative assets, ranging from global pension funds to foundations, family offices, endowments and funds of funds. The survey was completed in December 2014.

Fees in the alternative asset industry have dropped over recent years, according to Preqin’s data. The mean management fee charged by 2014 private equity buyout funds, for instance, is 1.90% compared to 2.01% for similar funds formed in 2007. Meanwhile, hedge funds launched in 2014 have mean fees of 1.54%, compared to 1.65% charged by funds formed in 2008.

Nonetheless, investors clearly feel more can be done, and some are voting with their feet. Fees were one of the reasons cited by CalPERS for their decisions to exit the hedge fund asset class last year.

Preqin’s survey also revealed other interesting data points. Real estate, for instance, looks set to receive greater fund flows this year, as more than three-quarters of the real estate investors responding to the survey said they were expecting to increase allocations in 2015. 

Nearly 80% of LP’s, meanwhile, intend to maintain or increase their allocation to private equity.

Hedge funds continue to command the greatest proportion of capital devoted to alternative assets, with nearly one-fifth of the survey’s respondents allocating 20% or more to the asset class. 

The full report is available for download at Preqin's website. 


In Depth

Q&A: Rotation Capital's Rothfleisch On SPAC 2.0

Aug 11 2017 | 7:43pm ET

Corporate actions have long been a staple of event-driven investors, but activity...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Star Mountain: Private Lending in the Lower Middle-Market

Aug 14 2017 | 4:45pm ET

Private credit has become one of the most popular alternative asset classes in recent...

 

From the current issue of