State of Institutional Separate Account Fees: Hedge Funds

About the Report

eVestment has manager-reported stated fees on thousands of traditional vehicles (separate/segregated accounts, pooled/commingled funds, and mutual funds), as well as thousands of alternative products. eVestment also extracts actual fee data from thousands of public fund documents, showing the fees managers and public funds have negotiated.

This report provides an overview of the negotiated fees from a sample of 180 hedge fund commitments made by 50 U.S. public plans, and also compares these negotiated fees to the stated fees managers have reported into the eVestment platform. For both hedge fund managers and institutional investors in these products, having an understanding of where fee negotiations tend to start and tend to finish is important to reaching an agreement which ultimately benefits both parties.

Report Highlights:

  • Hedge fund managers are more likely to negotiate down their management fees than their performance fees.
  • Discounts from stated fees were generally negotiated on larger commitments amounts.
  • The most common negotiated management fees were 1% (for managed futures and funds of hedge funds), 1.5% (equity and multi-strategy), and 2% (fixed income).
  • Managed futures funds offered the lowest negotiated fees for public plans among direct hedge fund strategies shown below, charging an average 0.7% in management and 16.4% in performance fees.

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