So much for high-water marks. At a few high-profile hedge fund firms, they disappear after just a year.
Och-Ziff Capital Management, Perry Capital and Brookside Capital all plan to reimpose their performance fees next year, whether or not they have actually recouped last year’s losses, Bloomberg News reports. All three firms have a one-year limit on performance fee waivers after an annual loss.
The return of performance fees at the three firms is not a change in policy, and ought not be a surprise to investors: The one-year expiration date on all performance fee waivers is clearly laid out in their investor agreements, Bloomberg reports. What’s more, there hasn’t been much investor anger about the policies—yet—according to Och-Ziff founder Daniel Och.
“We have not had discussions or comments with investors in terms of the high-water mark,” he said during Och-Ziff’s first-quarter earnings conference call.
The hedge fund rally this year means the return of performance fees won’t be insult to injury for some of the funds’ investors. Och-Ziff’s flagship OZ Master Fund is tantalizingly close to erasing last year’s 16% loss, needing to return just a few fractions of a percentage point over the year’s last four months to break even. But most of the three firms’ investors need something approaching a miracle.
Och-Ziff’s Asia and Europe funds both have a ways to go before reaching their high-water marks. Brookside, which is part of private-equity giant Bain Capital, needs to double its year-to-date return through December to erase its ’08 losses, while Perry Capital is up just 16% after shedding 26% last year.