Hedge Funds Investors War

Hedge Funds Investors War

Hedge Funds and Investors Face a War Over Terms?

Since hedge funds have rallied in 2009, managers may be feeling a bit more ambitious negotiating terms with investors.  But institutional investors are challenging this, considering the heavy losses that many hedge funds suffered just a year ago.  Some institutional investor predicts "war" between investors and hedge funds.
A key complaint of investors has been that while many of them lost money during the financial crisis, hedge fund managers were still able to rake in millions of dollars in fees. Last year, average hedge fund returns were a minus 19 percent.

"If they want money from us they will have to offer ... alignment of interests. If hedge funds remain arrogant and not humble, I think money will go elsewhere," Philip Read, chairman of the British Coal Staff Superannuation Scheme, said on Tuesday.

"We're increasingly going to gang up against you... Institutional investors are totally disillusioned with funds not delivering what was on the tin," he told the the Hedge 2009 conference in London. Hedge funds typically charge a management fee of 2 percent or sometimes more on assets -- well above the cost of mutual funds -- plus a 20 percent fee on performance, which is often levied on any positive returns not just those that fall above a "hurdle rate", or target agreed with the investor.  Source

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