15 Apr 2010
Over the course of 2009, Preqin carried out two surveys of fund managers to ascertain the industry standard for fees charged by hedge funds. Over 900 hedge funds from across the globe contributed data on their terms and conditions. Funds surveyed varied in size from funds with less than $10 million in assets to multi-billion dollar vehicles.
Key findings include:
- Single manager funds that charged the highest performance fees (i.e. 20%+) generated the highest 12- and 24-month returns for their investors.
- Only funds of funds that charged performance fees of at least 20% generated positive 24-month returns.
- Just 38% of all single manager funds charge the “standard” 2 and 20 fee structure.
- Single manager hedge funds charge an average 1.65% management fee.
- Performance fees for single manager funds currently stand at an average of 18.89%.
- European single manager funds have lower fees (1.59% management fee and 18.23% performance fee) than US-based funds (1.72% management fee and 19.12% performance fee).
- Managers that have compromised on fees have often negotiated longer lock-ups for their funds. Single manager funds that charge a management fee of 1.5% have a mean lock-up of 7.3 months. Funds with a management fee of 2% have a mean lock-up of 5.4 months.
- The mean fees charged by fund of funds managers are 1.44% management fee and 11.54% performance fee.
Key findings include:
- Single manager funds that charged the highest performance fees (i.e. 20%+) generated the highest 12- and 24-month returns for their investors.
- Only funds of funds that charged performance fees of at least 20% generated positive 24-month returns.
- Just 38% of all single manager funds charge the “standard” 2 and 20 fee structure.
- Single manager hedge funds charge an average 1.65% management fee.
- Performance fees for single manager funds currently stand at an average of 18.89%.
- European single manager funds have lower fees (1.59% management fee and 18.23% performance fee) than US-based funds (1.72% management fee and 19.12% performance fee).
- Managers that have compromised on fees have often negotiated longer lock-ups for their funds. Single manager funds that charge a management fee of 1.5% have a mean lock-up of 7.3 months. Funds with a management fee of 2% have a mean lock-up of 5.4 months.
- The mean fees charged by fund of funds managers are 1.44% management fee and 11.54% performance fee.
Amy Bensted, Hedge Fund Data Manager at Preqin, said: “The issue of fees continues to be much debated within the industry. Investor calls for more appropriate alignment of interests coupled with a difficult fundraising environment has led to shifts in the fee structures charged by fund managers. Single manager funds have cut management fees but performance fees have been less affected by the market crisis. Investors that access hedge funds directly are happy to reward good performance, and are willing to pay high performance fees. This has paid off for most investors as the funds that charged the highest performance fees have produced the strongest returns during the difficult markets of the past two years.”
