Moore Capital Said To Cut Fees on Flagship Macro Managers Fund

Dec 5 2016 | 11:23pm ET

Louis Bacon’s Moore Capital Management has become the latest large hedge fund manager to cut the fees it charges investors amid persistent pressures on the industry’s pricing model.

The New York-based firm will lower the management fee on its $7.5 billion Macro Managers fund, according to an article in The Wall Street Journal last week that cited an investor letter. The fund, which currently charges 3% annually, will reportedly lower the fee to 2.5%. Like many of its peers, the Moore macro fund suffered significant drawdowns in the first few months of the year, and was still -3.8% in the red as of the end of the third quarter.

Moore’s decision comes amid similar moves by other large managers. Brevan Howard Asset Management slashed management fees to zero for some investors in September, while Tudor dropped fees on its flagship fund back in May. Other hedge fund firms to reduce what they charge this year include Caxton and Och-Ziff.

Hedge funds traditionally followed a “2 and 20” fee model which incorporated an annual management fee plus a 20% cut of profits earned, often above a certain threshold. The financial crisis ushered in the first phase of pricing pressure, followed by several years of disappointing performance which, in the face of large fees and a low-return environment, has prompted large investors to question whether they have been getting their money’s worth from the hedge fund industry. Indeed, several large pension plans, including ones in New Jersey, Rhode Island and New York, have dramatically cut back allocations to hedge funds this year. 

Founded in 1989 by Bacon, who used a $25,000 inheritance to kick off his first fund, Moore is a multi-strategy hedge fund manager with approximately $14 billion in AUM invested across a number of vehicles engaged in global public equity and fixed income markets. 

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