8 Feb 2010
bfinance has announced the results from its second global fee survey conducted amongst Hedge Funds and Fund of Hedge Funds to understand recent trends and future expectations towards fee levels.
88% of hedge funds say they will not lower their fees from the 1.5%-2% base fee and 20% performance fee structure in 2010. This compares with 2009 findings of 56% who made a similar claim last year. While 44% of single hedge fund managers anticipated a drop in their fees in 2009, only 12% anticipate a decrease this year.
Underlying hedge fund managers demand the highest base fees in general with 32% reporting base fees in the 150-200bps range, which represents a 2% drop compared to the results of our previous survey in December 2008. Passive strategies have also emerged as cheaper with 35% of FoHFs charging a base fee of 50bps or less for a $100m investment compared to 27% in December 2008.
Over the next six months, the majority of respondents (51%) believe fees will remain unchanged, while 49% say they will go down. Last year, a larger percentage (54%) thought base fees would drop and 46% expected fees to stay the same. The same trend can be observed concerning FoHF performance fees with only 38% anticipating performance fees may drop in the coming six months compared with 46% in January 2009. Another 61% believe performance fees will remain unchanged while the figure was only 50% a year ago. An even smaller percentage (38%) believe underlying hedge fund fees will drop while 62% say they will remain unchanged in the coming six months.
Twenty-nine percent of hedge funds would consider offering a fee discount to an investor in exchange for a one-year lock up, compared to 46% in our 2009 survey. The overwhelming majority (71%) are unwilling to consider a fee discount in exchange for a one-year lock up.
For a two-year lock up, a majority (60%) are prepared to offer a fee discount while and 71% would be willing to do so for a three-year lock up. Single hedge fund managers indicated they were unwilling to accept adding hurdle rates in exchange for a longer lock up with only 19% willing to do so.
88% of hedge funds say they will not lower their fees from the 1.5%-2% base fee and 20% performance fee structure in 2010. This compares with 2009 findings of 56% who made a similar claim last year. While 44% of single hedge fund managers anticipated a drop in their fees in 2009, only 12% anticipate a decrease this year.
Underlying hedge fund managers demand the highest base fees in general with 32% reporting base fees in the 150-200bps range, which represents a 2% drop compared to the results of our previous survey in December 2008. Passive strategies have also emerged as cheaper with 35% of FoHFs charging a base fee of 50bps or less for a $100m investment compared to 27% in December 2008.
Over the next six months, the majority of respondents (51%) believe fees will remain unchanged, while 49% say they will go down. Last year, a larger percentage (54%) thought base fees would drop and 46% expected fees to stay the same. The same trend can be observed concerning FoHF performance fees with only 38% anticipating performance fees may drop in the coming six months compared with 46% in January 2009. Another 61% believe performance fees will remain unchanged while the figure was only 50% a year ago. An even smaller percentage (38%) believe underlying hedge fund fees will drop while 62% say they will remain unchanged in the coming six months.
Twenty-nine percent of hedge funds would consider offering a fee discount to an investor in exchange for a one-year lock up, compared to 46% in our 2009 survey. The overwhelming majority (71%) are unwilling to consider a fee discount in exchange for a one-year lock up.
For a two-year lock up, a majority (60%) are prepared to offer a fee discount while and 71% would be willing to do so for a three-year lock up. Single hedge fund managers indicated they were unwilling to accept adding hurdle rates in exchange for a longer lock up with only 19% willing to do so.
Olivier Cassin, Managing Director, Head of Research and Development bfinance said, “While we have seen that both Hedge Fund fees and Fund of Hedge Fund fees came down during the crisis, only Fund of Hedge Fund fees may further decrease slightly. The window of opportunity to secure substantially discounted fees from top Hedge Funds has now passed.
“We are also seeing our clients increasingly looking for direct investments in Hedge Funds, which puts increasing pressure on the fees of Fund of Hedge Funds,” continued Mr Cassin.
