Reduced Hedge Fund Fees

According to a September 2013 WSJ article, the average hedge fund charges a 1.6% annual management fee plus takes 18% of investment gains. Even some well-known firms have cut their fees; Carson Associates lowered its fees in 2012 to 2.6% and 27.5% from 3% and 30%. Citigroup’s private banking sector points out that an investor can negotiate lower fees, “especially if you can commit > $100 million.”

Industry-tracker HFR estimates hedge funds oversee $2.4 trillion of assets and collected $50 billion in management and performance fees for 2012. Information from a Goldman Sachs survey shows 26% of hedge fund clients negotiated performance hurdles and 17% had negotiated performance “claw backs.” The state of Rhode Island pays a 1.5% (or less) annual management fee for most of its hedge fund assets, but still pays a 25% performance fee to hedge funds overseen by Brevan Howard Asset Management and D.E. Shaw Group, two of the best-known hedge funds in the industry.