Tower Fund Services' Releases Recent Findings on Trends in Hedge Fund Fees
NEW YORK, NY (PRWEB) November 14, 2013 -- For those of us in the New York area that grew up with Sy Syms’ commercials for his clothing store, we all can recite his company’s slogan, “An Educated Consumer is our Best Customer”. Not surprisingly, this credo has made its way into main street consumer psyche in that comparison shopping with reviews and product details are out everyone’s fingertips.
Until recently when looking at fund costs, general perceptions have established the accepted reality. The traditionally accepted “two and twenty” hedge fund fee structure is being increasingly challenged and investors are getting more involved with negotiating fees that are in line with the value they feel they are getting. There is a move to bring into alignment the interests of the manager with those of the investor. Much of the focus has fallen on the set fees such as management versus performance. The “educated consumer” duly recognizes the increased costs of running a fund with increased regulations, transparency requirements and infrastructure needs but wants to make sure the manager is not generating excessive management fee income that he loses his incentive to generate alpha and earn a performance fee.
Investors recognize that top managers are rewarded with terms that are preferential to the manager plus those who provide unique strategies and scarcity value continue to command higher fees. Those managers that struggle to differentiate themselves in strategy and alpha generation potential find themselves in a weaker negotiating position and can end up with terms that are less aggressive. This holds for both hedge fund and private equity fund managers.
Investors are taking an active part in the spending of their capital. Managers who frivolously spend the investors’ money on non-competitively priced service providers are being scrutinized and the costs are being challenged. Private equity managers that are not conscious of deal generation costs are also seeing push-back on transaction costs with investors placing caps on costs that they will absorb. Once again the consumer wants the right product at the right price. Many of Tower’s prospective clients come from large firms as either members of a bank proprietary trading group, large hedge funds or large private equity groups. Their funds at the onset are smaller than they were accustomed to working with and the resulting fees and costs of maintaining the fund tend to have a greater impact on the fund’s performance.
There is a lot of time spent analyzing the fund manager’s internal capabilities, the investors’ needs, fund structure and strategy to pull together the optimal service providers and infrastructure that meets all those needs. Each manager’s needs are unique in as much as their strategy approach is and a cookie cutter solution does not work.
About Tower Fund Services
Tower Fund Services is a third-party administrator offering a full spectrum of tailored outsourced solutions for hedge funds, funds of funds, separate managed accounts, multi-manager platforms, private equity, venture capital, tax lien, and real estate funds. Its suite of services includes fund start-up consulting, accounting, valuation, reporting and tax services to alternative investment managers in all strategies and structures.
Vince Sarullo, Tower Fund Services, http://www.towerfundservices.com/, 732-704-7297 Ext: x701, [email protected]
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