A record of consistently high returns is allowing multi-manager hedge funds to command expenses fees three times higher those charged by their traditional single-manager fund peers, according to a report by Reuters.
A record of consistently high returns is allowing multi-manager hedge funds to command expenses fees three times higher those charged by their traditional single-manager fund peers, according to a report by Reuters.
The report cites a client note from Barclays as highlighting that while multi-manager hedge funds have outperformed the wider hedge fund industry’s 5.5% average annual return over the last five years with gains of 8.3%, that outperformance comes at a much higher cost to investors.
Instead of the traditional 2-and-20 hedge fund charge where investors pay a fixed 2% cost fee plus 20% of any profit, multi-manager fee structures are more like 7-and-20, said Barclays, due to the variable bonus payments made to traders depending on the performance of their strategies.
Even if the overall fund fund loses money, performance-related expenses are still charged to investors as individual traders earn bonus payments based in their individual performance.
