{"id":56303,"date":"2016-09-26T02:30:00","date_gmt":"2016-09-26T00:30:00","guid":{"rendered":"http:\/\/beta.next-finance.net\/note\/investors-increase-pressure-on-hedge-funds-to-lower-fees\/"},"modified":"2016-09-26T02:30:00","modified_gmt":"2016-09-26T00:30:00","slug":"investors-increase-pressure-on-hedge-funds-to-lower-fees","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/note\/investors-increase-pressure-on-hedge-funds-to-lower-fees\/","title":{"rendered":"Investors Increase Pressure on Hedge Funds to Lower Fees"},"content":{"rendered":"<p><strong>Despite industry moves towards lower management and performance fees, investors state that this is an area in need of further improvement<\/strong><\/p>\n<p>The latest research from Preqin on hedge fund fees finds that lower recent performance, high-profile redemptions and<br \/>\nincreased concern from investors on the issue of fees have influenced many hedge fund managers to bring their<br \/>\nmanagement and performance charges below the 2 &#038; 20 \u2018industry standard\u2019. Just 35% of hedge funds tracked by<br \/>\nPreqin currently charge both a 2.00% management fee and a 20.00% performance fee, and average fees have fallen<br \/>\nover recent years \u2013 in 2016, the mean management fee is 1.57%, while the mean performance fee is 19.29%.<br \/>\nFurthermore, among the most recent funds these fees are lower still: funds launched in 2016 have, on average, a<br \/>\n1.53% management fee and a 19.13% performance fee.<\/p>\n<p><quote>In part, this could be seen as a response from managers to increased and persistent concerns among investors in<br \/>\nrelation to fund fees. In Preqin\u2019s most recent survey of hedge fund investors, almost half (49%) cited fees as a key<br \/>\nissue facing the industry over the next 12 months, the joint highest proportion.<\/quote><br \/>\n At the same time, 58% said that they<br \/>\ndid not believe their interests were aligned with those of managers. However, the issue around fees has seen some<br \/>\nchange over the past 12 months: 58% of investors said they had seen fund terms and conditions shift in their favour,<br \/>\ncompared to just 8% that thought they had changed in favour of managers. Additionally, 63% and 32% of investors<br \/>\ncited management and performance fees respectively as an area of improvement over the past 12 months, although<br \/>\n73% and 60% respectively also cited these areas as in need of further improvement.<\/p>\n<p><strong>Round-up of Key Hedge Fund Fees Facts:<\/strong><\/p>\n<ul>\n<li> Just 35% of hedge funds currently charge both a 2.00% management fee and 20.00% performance fee.<\/li>\n<li> On average, hedge funds launched in 2016, have a 1.53% management fee and 19.13% performance fee; in<br \/>\ncontrast, funds incepted in 2007 have a 1.66% mean management fee and a 19.48% mean performance fee.<\/li>\n<li> Almost half of investors (49%) cited fees as a key issue facing the industry over the next year, with 58%<br \/>\nsaying their interests were not aligned with firms\u2019.<\/li>\n<li> Fifty-eight percent of investors said they had seen fund terms shift in their favour; 8% felt they had shifted in<br \/>\nfavour of hedge fund managers.<\/li>\n<li> Management and performance fees were cited by 63% and 32% of investors respectively as areas that had<br \/>\nimproved in the past year. However, 73% and 60% respectively cited these areas as needing further<br \/>\nimprovement.<\/li>\n<li> Funds with top quartile five-year annualized performance charge 19.67% in performance fees on average,<br \/>\ncompared to 18.75% for funds in the bottom quartile over five years.<\/li>\n<li> On average, funds with $5bn or more in assets charge 1.69% and 20.32% in management and performance<br \/>\nfees respectively, compared to 1.55% and 18.93% for funds with less than $100mn.<\/li>\n<\/ul>\n<p><em>\u201cThe hedge fund industry has now seen an extended period of lower performance, and four out of five investors<br \/>\nrecently stated that their hedge fund investments had not met their expectations in this area. In these circumstances, it<br \/>\nis not surprising that increasing scrutiny has been paid to the fees that hedge funds charge \u2013 especially in the wake of<br \/>\nsome high-profile investors citing fees as a factor in them reducing or liquidating their hedge fund portfolios. More than<br \/>\nhalf of investors surveyed by Preqin have mentioned both management and performance fees as areas in need of<br \/>\nimprovement, and a high proportion currently feel that their interests are not aligned with those of managers.<br \/>\nHowever, there is evidence that the industry has seen a general shift away from the \u20182 &#038; 20\u2019 fee structure, despite it<br \/>\nstill being considered the industry standard by many. The hedge fund market is increasingly crowded, and many<br \/>\nsmaller or newer managers are seeking to make their lower fees a way to differentiate themselves from their<br \/>\ncompetitors. It is true that the largest, oldest, and best performing hedge funds are still able to command higher fees,<br \/>\nbut if investors are prepared to commit to a lesser-known fund, they may find many opportunities that offer them a<br \/>\nsignificantly lower fee rate\u201d<\/em> comments Amy Bensted \u2013 Head of Hedge Fund Products, Preqin.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The latest research from Preqin on hedge fund fees finds that lower recent performance, high-profile redemptions and<br \/>\nincreased concern from investors on the issue of fees have influenced many hedge fund managers to bring their<br \/>\nmanagement and performance charges below the 2 &#038; 20 \u2018industry standard\u2019.<\/p>\n","protected":false},"author":20,"featured_media":56301,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1481],"tags":[1687,1655,1723,1690,1651,1437,2143,1724,2091],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/56303"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/20"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=56303"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/56303\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/56301"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=56303"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=56303"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=56303"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}