Friday, 5 November 2010

The 2 & 20 World is Dead

Ok I think we all know the 2 & 20 world is dead and gone - but what is going to replace it?
And what will that mean for Hedge Fund Managers and their Administrators?

Hedge Fund Managers I've spoken to have said they are happy in this new world to be getting a Management Fee of 1.5% and a Performance Fee of 15%  - even as low as 10 - 12% for large Institutuonal Investors.

Part of this trend is a move towards more varied, complex Performance Fees, with complicated Hurdles in the Fund Prospectus to be reached before the Manager collects his fee. The turbulence in the Industry since 2008 has accelerated this change. Without a doubt this will present a challenge to operational staff in our industry.

In many ways Hedge Fund Ops software had only just caught up to calculating the more standard Performance Fees, Hurdles, Loss Carried Forward etc. Will these more complex Fee models mean a return to the trusty old spreadsheet? I am pretty sure no Fund Accountant wants that but it will be interesting to see over the next couple of years how the main Hedge Fund Managers and their Administrators handle far more complex fee structures - especially on Hedge Funds that may be cutting their NAVs more regularly.

I think software vendors are going to be busy updating ther applications...   

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