Millennium to charge fees even if fund loses money
Millennium Management, the hedge fund founded by Izzy Englander, has changed its investor terms so that clients will now always be charged a minimum management fee, even if the fund loses money, according to a report by Bloomberg.
The report cites an investor letter as revealing that under the new charging structure, investors will now pay annual fees of about 1% of assets or 20% of investment gains – whichever is greater. According to Millennium, the move is part of an initiative to “reflect current industry-standard approaches” employed by other multi-strategy firms. Ken Griffin's Citadel, for instance, has implemented a similar fee structure.
The change, which is expected to take effect this summer, means that if the firm loses money or generates an annual return of less than 5%, it will still be guaranteed fees amounting to hundreds of millions of dollars. The firm which was funded in 1990, has only returned less than 5% in two years: 2008 and 2016.
According to the letter, if Millennium does end up levying the 1% asset charge, the fund will have to recover that amount before levying a performance fee the following year.