- Advertisement -
- Advertisement -

Related

“2 and 20”: Industry Standard No More?

Latest Report

- Advertisement -

Stockholm (HedgeNordic) – Of the hedge funds tracked by Preqin, only 35% currently charge both a 2% management fee and a 20% performance fee, with average fees falling across recent years, according to its latest study. The findings suggest impaired performances and high-profile redemptions resulting in increased investor concern have influenced numerous hedge fund managers to bring down management and performance fees below the 2/20 industry standard.

“The hedge fund industry has now seen an extended period of lower performance, and four out five investors recently stated that their hedge fund investments had not met their expectations in this area,” says Amy Bensted, head of hedge fund products at Preqin. “In these circumstances, it is not surprising that increasing scrutiny has been paid to the fees that hedge funds charge – especially in the wake of some high-profile investors citing fees as a factor in them reducing or liquidating their hedge fund portfolios,” Ms Bensted suggests, explaining more than half of investors surveyed by Preqin mentioned management and performance equally as areas in urgent need of improvement, with a high proportion intuiting that their interests are not sufficiently aligned with those of managers.

The mean management fee in 2016 is 1.57%, with the mean performance fee being 19.29%. Fees are lower still among recently launched funds, with those launched in 2016 demanding a 1.53% management fee and a 19.13% performance fee on average.

This is likely partly due to a response from managers to persistent and increasing concerns among investors in relation to fund fees. 49% of hedge fund investors in the most recent Preqin survey cited fees as a key issue facing the industry over the next year, while 58% responded they did not believe their interests to be aligned with those of managers.

There is evidence, therefore, “that the industry has seen a general shift away from the ‘2 and 20’ fee structure, despite it still being considered the industry standard by many,” adds Ms Bensted. “The hedge fund market is increasingly crowded, and many smaller or newer managers are seeking to make their lower fees a way to differentiate themselves from their competitors. It is true that the largest, oldest, and best performing hedge funds are still able to command higher fees, but if investors are prepared to commit to a lesser-known fund, they may opportunities that offer them a significantly lower rate.”

Indeed, issues surrounding fees have undergone significant change in the last 12 months. Preqin’s survey reported that 58% of investors had seen fund terms and conditions shifting in their favour, compared to just 8% deeming they had shifted in the favour of managers.

In addition, 63% and 32% of investors cited management and performance fees respectively as areas of improvement in the past year, although 73% and 60% respectively also cited these areas as being in need of still further improvement.

Picture: (c) cosma-shutterstock.com

Subscribe to HedgeBrev, HedgeNordic’s weekly newsletter, and never miss the latest news!

Our newsletter is sent once a week, every Friday.

Glenn Leaper, PhD
Glenn Leaper, PhD
Glenn W. Leaper, Associate Editor and Political Risk Analyst with Nordic Business Media AB, completed his Ph.D. in Politics and Critical Theory from Royal Holloway, University of London in 2015. He is involved with a number of initiatives, including political research, communications consulting (speechwriting), journalism and writing his post-doctoral book. Glenn has an international background spanning the UK, France, Austria, Spain, Belgium and his native Denmark. He holds an MA in English and a BA in International Relations.

Latest Articles

Sissener Expands Investment and Sales Teams with Senior Hires

Just months after bringing on Mads Andreassen as Investment Manager, Norwegian fund boutique Sissener AS continues to expand its team with two key additions....

Fenja Capital Deepens Bench as Analyst Moves to Full-Time Role

After earning his Master’s degree in Economics from Aalborg University, Anders Madsen has transitioned from a part-time role to a full-time analyst position at...

Accendo-Backed SSH Secures Major Investment from Leonardo

While public and policy discussions around defence often focus on conventional weapons, many of today’s most active and frequent battles are unfolding in cyberspace....

Swedbank Robur Strengthens Private Equity Team

Swedbank Robur has appointed Lorenzo Gregory Sormani as co-portfolio manager of its private equity fund, Swedbank Robur Alternative Equity I, joining Senior Portfolio Manager...

Beyond Renewables: Coeli Fund Taps Into the Broader Electrification Race

Earlier this year, portfolio managers Vidar Kalvoy and Joel Etzler renamed their fund from Coeli Renewable Opportunities to Coeli Energy Opportunities – a move...

Three Danish Hedge Funds Recognized by the Hedge Fund Journal

Three Danish hedge funds have been recognized at the 2025 Hedge Fund Journal CTA and Discretionary Trader Awards. Two funds managed by Danske Bank...

Allocator Interviews

In-Depth: High Yield

Voices

Request for Proposal

- Advertisement -
HedgeNordic
Privacy Overview

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.