BFW 09/11 06:52 Most Hedge-Fund Managers Are Overpaid, Unigestion Says
Most Hedge-Fund Managers Are Overpaid, Unigestion Says (1)
2014-09-11 06:46:51.669 GMT
(Updates with comment from fund services executive in
third paragraph under subhead Coming Down.)
By Klaus Wille
Sept. 11 (Bloomberg) -- Nine out of 10 hedge-fund managers
are overpaid as management fees don’t reflect declining interest
rates and fund returns, according to Unigestion Holding SA,
which invests $2 billion in hedge funds.
The fees, which still make up as much as 2 percent of a
fund’s assets, represent a disproportionately high share of the
total remuneration unrelated to performance, said Nicolas
Rousselet, head of hedge funds at Unigestion. To align managers’
pay more with performance, the fund industry should either
abandon the management fee or combine it with a hurdle rate that
one must achieve before collecting incentive fees, he said.
“The philosophy of the hedge-fund industry, as it should
be, is to remunerate true talent,” Rousselet said in a
telephone interview on Sept. 9. “Fund managers should be
remunerated when they perform. They should not be remunerated
for doing nothing.”
Fees are coming down amid efforts to win mandates in an
industry that traditionally charges about 20 percent on
performance and 2 percent on the total assets. Investors paid an
average 1.69 percent last year, with the share of those who paid
1.5 percent or more at 79 percent, almost unchanged from 2012,
according to a Deutsche Bank AG survey published in February.
Global hedge funds returned 8.6 percent in 2013 and 6.9
percent in 2012, compared with 10 percent to 21 percent in nine
of the 11 years through 2010, according to Singapore-based data
provider Eurekahedge Pte.
BlueCrest Capital
Unigestion, based in Geneva, manages $16 billion, of which
$2 billion is invested in about 60 hedge funds through its funds
of hedge funds, said Rousselet.
Among hedge funds that have taken steps recently to trim
what they charge was BlueCrest Capital Management LLP, which
said earlier this month it cut management fees on its $8.2
billion computer-driven hedge funds to 1.5 percent from 2
percent after assets tumbled in the past year.
“In a low-rate, low-growth environment it is far more
difficult to justify high management fees,” said Keith Pogson,
a Hong Kong-based senior partner for financial services at Ernst
& Young Global Ltd. “Hedge-fund managers should work harder to
justify the fees that they earn.”
Coming Down
Ninety-four percent of Unigestion’s assets come from about
250 institutional clients and 6 percent from high-net-worth
families, according to the firm’s website.
Unigestion’s head of marketing Jean-Francois Hirschel
declined to elaborate how much the firm charges its clients for
selecting hedge funds. He said that the firm’s share is about 10
percent of the clients’ total expense.
“In general, fees have come down over recent years,” said
Celia Choh, Singapore-based head of fund services for Asia at
Wells Fargo Global Fund Services. In Asia, management fees are
now typically between 1 percent and 1.5 percent for early
investors, she said.
Fee negotiations “continue to become a more accepted
practice for investors and managers globally,” according to the
Deutsche Bank survey. Seventy-four percent of respondents said
they negotiate fees, up from 51 percent two years earlier.
“We are negotiating with hedge-fund managers,” Rousselet
said, adding that he doesn’t see management fees trending down.
“But if you buy a top manager, the bargaining power is not in
your hands.”
For Related News and Information:
Most Hedge Funds Can’t Justify High Fees, Joel Greenblatt Says
FIFW NSN N53ZHU6TTDSB <GO>
Investors Seeking to Alter Hedge-Fund Fees Backed by IRS Ruling
FIFW NSN N6ZBXE6JIJUY <GO>
London Hedge-Fund Director Bonuses Slump 94% as Returns Fall
FIFW NSN NALQEW6S972O <GO>
To contact the reporter on this story:
Klaus Wille in Singapore at +65-6231-3658 or
kwille@bloomberg.net
To contact the editors responsible for this story:
Andreea Papuc at +852-2977-6641 or
apapuc1@bloomberg.net
2014-09-11 06:46:51.669 GMT
(Updates with comment from fund services executive in
third paragraph under subhead Coming Down.)
By Klaus Wille
Sept. 11 (Bloomberg) -- Nine out of 10 hedge-fund managers
are overpaid as management fees don’t reflect declining interest
rates and fund returns, according to Unigestion Holding SA,
which invests $2 billion in hedge funds.
The fees, which still make up as much as 2 percent of a
fund’s assets, represent a disproportionately high share of the
total remuneration unrelated to performance, said Nicolas
Rousselet, head of hedge funds at Unigestion. To align managers’
pay more with performance, the fund industry should either
abandon the management fee or combine it with a hurdle rate that
one must achieve before collecting incentive fees, he said.
“The philosophy of the hedge-fund industry, as it should
be, is to remunerate true talent,” Rousselet said in a
telephone interview on Sept. 9. “Fund managers should be
remunerated when they perform. They should not be remunerated
for doing nothing.”
Fees are coming down amid efforts to win mandates in an
industry that traditionally charges about 20 percent on
performance and 2 percent on the total assets. Investors paid an
average 1.69 percent last year, with the share of those who paid
1.5 percent or more at 79 percent, almost unchanged from 2012,
according to a Deutsche Bank AG survey published in February.
Global hedge funds returned 8.6 percent in 2013 and 6.9
percent in 2012, compared with 10 percent to 21 percent in nine
of the 11 years through 2010, according to Singapore-based data
provider Eurekahedge Pte.
BlueCrest Capital
Unigestion, based in Geneva, manages $16 billion, of which
$2 billion is invested in about 60 hedge funds through its funds
of hedge funds, said Rousselet.
Among hedge funds that have taken steps recently to trim
what they charge was BlueCrest Capital Management LLP, which
said earlier this month it cut management fees on its $8.2
billion computer-driven hedge funds to 1.5 percent from 2
percent after assets tumbled in the past year.
“In a low-rate, low-growth environment it is far more
difficult to justify high management fees,” said Keith Pogson,
a Hong Kong-based senior partner for financial services at Ernst
& Young Global Ltd. “Hedge-fund managers should work harder to
justify the fees that they earn.”
Coming Down
Ninety-four percent of Unigestion’s assets come from about
250 institutional clients and 6 percent from high-net-worth
families, according to the firm’s website.
Unigestion’s head of marketing Jean-Francois Hirschel
declined to elaborate how much the firm charges its clients for
selecting hedge funds. He said that the firm’s share is about 10
percent of the clients’ total expense.
“In general, fees have come down over recent years,” said
Celia Choh, Singapore-based head of fund services for Asia at
Wells Fargo Global Fund Services. In Asia, management fees are
now typically between 1 percent and 1.5 percent for early
investors, she said.
Fee negotiations “continue to become a more accepted
practice for investors and managers globally,” according to the
Deutsche Bank survey. Seventy-four percent of respondents said
they negotiate fees, up from 51 percent two years earlier.
“We are negotiating with hedge-fund managers,” Rousselet
said, adding that he doesn’t see management fees trending down.
“But if you buy a top manager, the bargaining power is not in
your hands.”
For Related News and Information:
Most Hedge Funds Can’t Justify High Fees, Joel Greenblatt Says
FIFW NSN N53ZHU6TTDSB <GO>
Investors Seeking to Alter Hedge-Fund Fees Backed by IRS Ruling
FIFW NSN N6ZBXE6JIJUY <GO>
London Hedge-Fund Director Bonuses Slump 94% as Returns Fall
FIFW NSN NALQEW6S972O <GO>
To contact the reporter on this story:
Klaus Wille in Singapore at +65-6231-3658 or
kwille@bloomberg.net
To contact the editors responsible for this story:
Andreea Papuc at +852-2977-6641 or
apapuc1@bloomberg.net