Hedge Fund of Fund Investments | Trends & Negotiations

Fund of Fund Investments

Hedge Fund of Fund Investments

Hedge Fund of Fund InvestmentsI've heard some professionals in the hedge fund industry say that many fund of funds have simply found away to charge high fees without really doing anything except marketing. I've heard other say that those connected to Madoff who never did their due diligence should be hung. Both of these statements may be extreme, but fund of funds are receiving a lot of push back right now. Many hedge fund of funds have been lowering fees for the last two years, now with recent concerns over their role in the investment community and lackluster performance they will need to even more. Here is a short piece on pension funds and how they are negotiating with hedge fund managers:

Global pension funds are sorely disappointed with the fees they pay for actively-managed funds of funds, according to a new survey.

New findings from London-based bfinance indicate that a majority of pension schemes favor lower fees from their alternative managers. What’s more, they want discounts of between 10% and 30% without conceding to a one-, two- or three-year lock-up in exchange.

However, 45% of investors said they are willing to consider trading liquidity for a reduction in fees.

“The traditional ‘2 and 20’ model of a 2% flat fee and a 20% performance fee is unlikely to survive last year’s market bloodletting,” according to the firm. “Our respondents have been negotiating hard with their asset managers to reduce fees. A medium-sized pension fund of a Scandinavian insurance company has been negotiating to reduce both base and performance fees on assets that it cannot redeem because of gate restrictions.” source

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