Traditional hedge fund managers charged an average management fee of 1.8% annually in 2023, while managers offering bespoke strategies charged significantly less, with an average fee of 0.9%, according to the 2023 Seward & Kissel Established Manager Hedge Fund Study.
The study defines “established managers” as those who have been in operation for at least five years and manage over $1bn in regulatory assets. Traditional strategies, as outlined by Seward & Kissel, include long-short, macro, and debt/equity investments, whereas bespoke strategies cover income and defensive funds. The report found that only 10% of the hedge funds offered bespoke strategies.
Of the traditional hedge funds studied, 50% were equity-focused, while macro and credit strategies each accounted for 25%. Additionally, 25% of traditional strategy funds did not charge an incentive allocation, but for the 75% that did, the average rate was around 22%. In contrast, none of the bespoke strategy funds charged an incentive allocation.
The study also revealed that 20% of traditional strategy hedge funds had a hurdle rate, which is a minimum rate of return before managers can collect performance fees. When it came to liquidity terms, 25% of traditional strategy funds allowed for monthly liquidity with at least 15 days’ notice. The remaining 75% required an average of 55 days’ notice and offered quarterly liquidity, with 25% of those funds also enforcing a quarterly gate.
