Hedge funds earned $1.8tn in fees from 1969 through to the end of December 2024, which equates to approximately half of the profits made from their trading activities, according to a report by Reuters citing data released by LCH Investments.
LCH Investments, a key hedge fund investor and part of Edmond de Rothschild, found that the top 20 performing hedge funds typically charge higher fees but deliver stronger returns and experience fewer investor outflows. These top funds kept about 34.3% of their gains before fees over this period, according to the data.
“When hedge funds make losses, the performance fee paid during profitable periods is not refunded,” explained Rick Sopher, Chairman of LCH Investments, in a call with Reuters. “So if the fund closes or investors redeem their investments before the fund recovers the losses, they end up paying disproportionately high fees.”
In 2024, the top 20 performing hedge funds returned a net total of $93.7bn to investors after fees. DE Shaw, a multi-strategy hedge fund, saw its best year yet, delivering $11.1bn in net returns to investors. British hedge fund Marshall Wace made its first appearance in the top 20, returning $4.5bn to investors.
According to hedge fund research firm HFR, 326 hedge funds closed in the first three quarters of 2024, as smaller managers struggle to recover from poor performance and outflows.
Sopher also revealed that LCH, the world’s first fund of hedge funds, which was founded in 1969, is set to close later in 2024, but Edmond de Rothschild will continue investing in hedge funds through other funds within the Group.
