Sun, 22/11/2009 - 14:22
Almost 80 per cent of institutional investors believe hedge fund fees are too high, according to the 2010 Preqin Hedge Fund Investor Review.
Several prominent hedge fund investors, notably Calpers, have publicly called on hedge fund managers over the course of 2009 to reduce their management and performance fees.
According to Preqin, just 24 per cent of institutional investors feel that hedge fund fees at their current level are justified. Approximately 60 per cent of institutional investors feel that hedge fund fees are too high with a further 17 per cent of investors surveyed stating that although fees are coming down, they remain too high.
Institutional investors are becoming both more aware of their power to negotiate fees as well as increasingly using this power to drive fees down. Approximately half of all investors surveyed have tried to negotiate the management fees and performance fees associated with their hedge fund investments, with 62 per cent of those investors which have attempted negotiations being successful. A further 22 per cent of institutional investors were considering approaching negotiations with hedge fund managers to reduce the fees charged on their funds.
The review also found that over 73 per cent of institutional investors are satisfied with hedge fund returns in 2009, up from 62 per cent in 2008, and in turn approximately 66 per cent of all hedge fund investors are either confident or very confident in the ability of hedge funds to perform portfolio objectives.
In addition, 29 per cent of institutional investors intend to increase the amount of capital they invest in hedge funds over 2010, with 51 per cent maintaining their existing exposure and 20 per cent decreasing their current exposure.
However, Preqin says that even some of those investors that are seeking to maintain their current allocations to the asset class are also looking to make investments in new funds as they seek to rebalance their portfolios and to take advantage of the latest opportunities and the best performing hedge fund strategies.
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