Hedge funds face pressure to change fee structures

  • Top investors call for changes in hedge fund fee structures
  • Hedge funds criticized for charging fees on ‘skill-less’ returns
  • Institutional investors urge adoption of cash hurdles model
  • Pressure on management and performance fees decreases

A group of 29 pension funds, sovereign wealth funds, and asset managers have penned an open letter urging the hedge fund industry to stop charging fees for ‘skill-less’ returns and adopt a cash hurdles model. They argue that the current ‘two and twenty’ fee arrangement misaligns interests with clients due to higher risk-free rates. The signatories include major players like GIC, MacArthur Foundation, Credit Suisse Pension, and Virginia Retirement System.

Factuality Level: 8
Factuality Justification: The article provides accurate and objective information about the concerns raised by a group of institutional investors regarding hedge funds’ fee structures and their impact on the long-term health of the industry. It presents the current situation and arguments from both sides, including counterarguments from Bruno Schneller. The information is relevant to the main topic and not overly dramatic or sensationalized.
Noise Level: 4
Noise Justification: The article provides relevant information about the concerns of institutional investors regarding hedge funds’ fee structures and their impact on the long-term health of the industry. However, it lacks in-depth analysis or evidence to support its claims and does not offer actionable insights for readers.
Public Companies: Credit Suisse (CS)
Key People: Bruno Schneller (Managing Director at Erlen Capital Management)

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Financial Relevance: Yes
Financial Markets Impacted: Hedge funds industry
Financial Rating Justification: The article discusses the financial practices of hedge funds and their impact on institutional investors, as well as the potential changes in fee structures within the industry. This has implications for both the hedge fund sector and the investors involved.
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Extreme Rating Justification: There is no extreme event mentioned in the article. The content discusses a financial crisis related to hedge funds and their fee structures, but it does not describe an extreme event.

Reported publicly: www.marketwatch.com