Hedge fund managers don’t deserve fees

IPE.com – Hedge fund managers do not always deserve their high fees, according to a recent research report by Barclays Global Investors.

While hedge funds do have some structural advantages, traditional investment firms also attract talented managers and provide their own set of advantages to institutional clients, according to BGI’s‘Five Myths About Fees: The truth behind analysing fees in the context of investment goals’.

“Also, keep in mind that the current hedge fund boom has not increased the overall supply of alpha; it was always zero and still is,” said the report.

According to BGI, ‘hedge funds are where the alpha is – they deserve their high fees’ is one of five fee myths. The others include ‘fees should be as low as possible’, ‘incentive fees are better thanfixed fees’, ‘high-water marks always help investors’ and ‘you can always separate alpha from beta and pay appropriate fees for each’.

Pension funds today – particularly those, which are “significantly” underfunded – are “in desperate need of alpha”, said BGI. “The demand for alpha has never been higher.”

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