Annus Horribilis For Hedge Funds Illustrates Benefits Of Performance-Based Fees

Oct 2 2008 | 7:06am ET

By Christopher Holt -- Cynics often describe hedge funds not as a unique asset class or investment strategy, but as a unique “fee structure.“ To some extent, they are correct.

After all, mutual funds now use hedge fund strategies (long/short, 130/30 etc.) and yet we still call them mutual funds. Conversely, many hedge funds pursue high-beta long bias (a.k.a. mutual fund) strategies, yet we still refer to them as hedge funds.  And indeed, one of the main regulatory differences between the two types of funds is the ability to charge a performance fee.

Hedge fund fees are generally viewed by the media with a jaundiced eye. Many people have expressed frustration that hedge fund fees don’t seem to budge -- even as hedge funds have been producing lackluster absolute returns.

Take 2008 for example. A recent study by Eurekahedge recently found that 90% of hedge funds are currently below their hurdle rates or high water marks and are therefore at risk of earning no performance fee this year. And that was only as of July 31. Continue Reading Article On AllAboutAlpha


In Depth

Creating An Offshore Hedge Fund Dream Team: The Seven Key Players

Jun 26 2015 | 6:47am ET

If you want to set up an offshore hedge fund, like any great team, you’re only...

Lifestyle

Hedgies Set to Compete in Wall Street Decathlon

Jun 8 2015 | 12:37am ET

The Wall Street Decathlon — a 10-event physical challenge that will crown “Wall...

Guest Contributor

6 Essential Principles To Balance Your Investment Risk

Jun 26 2015 | 10:07am ET

In this article, financial expert Greg Silberman explores how to hedge a private...

 

Editor's Note