That is, they may periodically convert their asset fees to carried interest and thus reduce their taxes.
However, we're now seeing the scale institutional investors, the so called "real money" investors (endowments, foundations, pensions and sovereign wealth funds), beginning to put downward pressure on alternative asset fees as well.
When a sponsor charges every fee possible to the investor (acquisition fee, asset management fee, financing fee, disposition fee, etc). and wants to share disproportionately in the operating cash flow before the investment is a success and then takes a level of carried interest not commensurate with the risk in the deal, it's time to move on.
In the meantime Burkle, just like his competitors, can cover the light bills with an asset fee of 1.5% to 2% per year while waiting for the big payoffs that generate the 20% carry.
Additionally, Wealthfront only charges customers assets fees, with no commission fees.
Schack and Hopkins, through their attorney, say that everything Pyne complains about, "be it valuation of assets, fees earned by [their management company] or otherwise, was approved by the full board of directors, fully disclosed to shareholders, and ratified by the shareholders after full disclosure at every annual general meeting".
As RiskMetrics points out, it could lead to overpayment for assets, fee structures that encourage big investments with lots of debt, and accounting policies that can exaggerate performance.
The percentage-of-assets fee is well entrenched in wealth management.
A typical assets fee, Ke says, is 1% of the first $1 million and a declining percentage of larger amounts.
In addition to the percentage of assets fee, Betterment will charge a $1,500 annual administrative fee to plans with less than $1 million in assets.
Sometimes JV partners will want to charge everything from an acquisition fee, sales fee, debt origination fee, fee for raising equity from you the family office and asset management fees.
