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Practically, the IA's ideas were along the lines of: let's stop hiding fund performance fees and transaction costs and set them out nice and clearly instead.
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Shares of the Blackstone Group, the Fortress Investment Group and KKR & Company are down significantly year to date; investors are clearly discounting these firms' future earnings, which is powered by their funds' performance fees.
Although much attention is paid to the 20% incentive allocation paid to successful managers, either in the form of "carried interest" for private equity funds or "performance fees" for hedge funds, management fees can provide for substantial revenue streams, especially as these funds grow bigger and bigger.
Is portfolio manager compensation related to fund performance and fees?
In a landmark 2009 study, Javier Gil-Bazo and Pablo Ruiz-Verdứ Ruiz-Verdứe relationstudiedtheen mutual fund perelationshipanagement fees, commissions and flow of funds in The Relation between Price and Performutualin the Mutual fund Industry.
Saudi funds tend to have stiff expense ratios and, in some cases, hedge-fund-like performance fees, as well.
At present, some charges are actually rising: there are funds with performance fees of 50%, which smacks of bubbledom.Bubble or no, there is every chance that hedge funds will perform less well in future than in the recent past.
Jupiter is looking at absolute-return funds with performance fees, in which it would take some control of asset allocation.
That is probably because two-thirds of funds charge performance fees only if they are at or above their highest valuations.
This will be an issue in hedge funds because performance fees are typically paid on both realised and unrealised gains.
Generally, the structure of a hedge fund's performance fee is simpler than a private equity fund's carried interest.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com