15/01/2009

Hedge fund fees likely to drop says new survey

Institutional investors feel that the fees from funds of hedge funds (FoHF) are poor value for money, according to a new survey conducted by consultant, bfinance.

Around 60% of respondents felt FoHF fees were poor value, while 96% deemed the value for money from passive equity investments as good or fair. According to the survey, pension funds feel the fees for hedge funds and FoHFs generally need to go down – 77% stated their priority is for lower base fees, while 52% want performance fees to be reduced and for there to be an increase in hurdle rates.

bfinance also surveyed investment managers and hedge fund managers noting their fees are likely to decrease and they expect the median level for base fees for FoHFs to decline 9% to 95bps and for the median level of performance fees for hedge funds to decline 25% to 13%.

“Although the study indicates disenchantment with the industry in general, and disenchantment with FoHFs… the study also rather paradoxically suggests that allocations to FoHFs, as well GTAA, infrastructure, real estate and private equity FoFs are set to increase in the future,” commented David Vafai, CEO of bfinance.

The consulting firm spoke to 32 institutional investors, with assets totalling ¤1.2bn ($1.59bn).
Respondents came from ten countries including the United Kingdom, Canada, the Gulf Region, the Nordic Region and Germany