When the hedge fund industry was in freefall last year, it was widely assumed that the end of an era was at hand. No longer would hedge funds be able to dictate terms on fees and liquidity to an angry investor base, including many more institutional investors than before, which would demand lower costs and fewer restrictions on their capital.
So much for the doom and gloom crowd. According to a new report, very little has changed in the hedge fund industry when it comes to fees and liquidity terms. According to Olympia Capital Management, the dramatic turnaround in performance for hedge funds this year has strengthened the industry’s hand, and only a handful have made concessions on redemption dates, lockup periods or fees.
“Industry analysts expected the level of fees to decrease in order to reflect both the strong decrease in demand for hedge funds and their disappointing performance,” Guido Bolliger, chief investment officer of the French fund of hedge funds shop, told The Wall Street Journal. Not so. “We have not seen any significant changes in the liquidity terms and fees taken by hedge funds during the first half of 2009.”
The Olympia research covered some 2,659 hedge funds.
Another recent study of hedge fund fees, this one by Hedge Fund Research, backs up Olympia’s findings to an extent. HFR found that performance fees at hedge funds have fallen since the economic crisis began, but only fractionally. Hedge funds charged an average of 19.18% for performance at the end of June, compared to 19.3% 15 months earlier.