Competition Forcing Hedge Funds to Lower Fees

July 18, 2016 Debbie Jacobs Hedge Fund News

Just like any other industry, competition combined with poor results is forcing hedge funds to charge less for their services to entice customers.

The current fee structure, known as 2-and-20, for the 2 percent fee charged on the total number of assets managed, and for the 20 percent of return managers take as their share of the profits. These high fees have long been a bone of contention between managers and their clients, but as more funds close and performance of these funds is in the doghouse, many investors are demanding more reasonable fees.

“Looking forward, you’ve seen this huge trend on average fee-collecting for hedge funds declining. That trend is strong and it’s going to continue going forward,” said Donald Steinbrugge, managing partner of Agecroft Partners, an industry marketing firm. “There’s going to be pressure on new funds coming out to be in line more with a 1½-and-20 model than a 2-and-20 model.”

2-and-20 fee, Agecroft Partners, Donald Steinbrugge,

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