A new study by Barclays suggests that when it comes to hedge fund fees and returns, it really is case of you get what you pay for, according to a report by Bloomberg.
Recent research by Barclays’ Capital Solutions Group, looking at the fees and returns from around 290 hedge funds, reveals that the firms that charge the highest fees – quite often the industry’s biggest names – generate better returns for investors than cheaper rivals.
Top off the pile in terms of performance are multi-manager funds, which use groups of traders to invest across markets, and the study found that those charging full pass-through fees, whereby investors pay for the full cost of operations, portfolio-manager compensation and other expenses, generate “superior net returns”. When compared with firms that only charge partial or no pass-throughs, they also produce more alpha too.
The study examined annualised returns between 2019 and June 2022 of about 40 multi-manager funds overseeing an average of $7 billion of assets, and 250 traditional funds – those that charge clients a portion of fees and assets – with an average of $2 billion in assets. Within traditional funds, those with higher combined fees also produced stronger net returns and alpha than peers with lower fees, the report found.
