Fees… that single word which, more than any other word or topic, has polarised both investors and managers alike, is never far from the spotlight. Once upon a time the 2 & 20 model was the default position, now there are so many variations its hard to keep up with them all.
AIMA Australia’s Investor advisory group’s (IAG) latest paper “How Much?” aims to navigate the some times vexed issues of fees by examining the evolution of fees, fee budgeting, fees for differing strategies, fee negotiating and conditions, what’s normal, where are fees headed, and ultimately a look at aligning interests.
One of the goals of the IAG is to provide guidance on best practice for the local industry, and offer insights into product development, gleaned from exposure to international firms and trends. Fees, and an in-depth discussion of them, falls clearly into these objectives, and the IAG is committed to an on-going discussion on this, and all aspects of funds management.
Whilst this paper was specifically designed by the Australian IAG, it follows on from a number of AIMA research reports where fund fees and structures have been discussed over the last number of years. The most notable were the two surveys conducted with RSM, In Concert (2016) and In Harmony, the latter being published last year. The key finding of these papers being that hedge funds have moved beyond the 2&20 fee model to a variety of flexible fund fee structures. Rather than merely reducing the headline fee, hedge fund managers are examining more equitable compensation arrangements that are beneficial to them and their investors.
AIMA is also teaming up with international law firms Simmons & Simmons and Seward and Kissel to explore the latest trends regarding hedge fund fees and fund structures. This work will be informed by an industry wide survey sent out in August. To participate in this survey please go to https://www.aima.org/article/global-hedge-fund-benchmark-survey.html. The findings from this report will be published early next year.
Like the previous papers from the IAG, we expect the discussion in “How much” will be thought provoking and, with feedback from you the member, will provide additional key topics that we can look to delve into in more detail in the future, including further thought pieces, roundtables, forums, or general discussion topics.
We would like single out and thank the members of the Investor Advisory Group, who contributed to the virtual round table; Grant Harslett (Maritime Super), John Zavone (NSW T-Corp), Anastassia Juventin (AMP Capital), Ben Samild (Future Fund), Charles Wu & Keri Pratt (SAS Trustee Corporation) and thanks to the other members of the Investor Advisory Group for their ongoing involvement and support.
We hope you enjoy the latest IAG virtual round table and as usual all feedback is welcome.
Managing Director, Head of Australia, AIMA
Global Head of Investech, Public Markets, AMP Capital