Capital Allocators – Inside the Institutional Investment Industry WTT: Reducing Fees: Actions Speak Louder Than Words
Jun 21, 2024
Exploring the urgent need for allocators to reduce hedge fund fees, the discussion reveals the impact of both historical and contemporary strategies. It highlights how decisive actions can lead to significant improvements in net returns. The challenges smaller allocators face in fee negotiations are addressed, emphasizing the necessity for proactive measures instead of passive requests. This insightful dialogue underscores the critical role that fee structures play in optimizing investment performance.
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1994-1995 Rate Hike Response
- In 1994-1995, one institutional investor dealt with rising interest rates by discussing fee adjustments with hedge fund managers.
- They redeemed managers who didn't adjust, resulting in a better-performing portfolio.
Ineffective Advocacy
- Ten years prior, another investor group advocated for better terms but didn't enforce them.
- This lack of action led to minimal change and unremarkable performance.
Britt Harris' Fee Innovation
- In 2017, Britt Harris offered a 1% or 30% fee structure to managers.
- Many accepted, creating positive change for his capital and the industry.