没有2-and-20？No Problem

Hedge fund managers are finally finding ways to change the long-held perception that the way they charge for their services is unfair.

While the actual sticker price charged by many hedge fund firms has been declining for some time — albeit not as much as some investors would like — experts say managers are now changing not just their prices, but the industry-standard fee structure itself. With investors having soured on hedge funds in recent years owing to a combination of lackluster performance and high prices, managers are looking tonovel structures吸引新客户并保持现有的客户。

These methods can range from offering sliding-scale fees — such as an upfront fee break for so-called founding-class investors for taking a chance on a new firm — to multi-year incentive allocations that are based on performance in a given year, according to Steven Nadel, a partner at law firm Seward & Kissel who works with hedge fund firms.

The changes may be working: A recent Preqin survey of hedge fund managers said 30 percent think the fundraising environment today is tougher than it was a year ago, compared with nearly 50 percent who said the samea year earlier.

“投资者高兴对冲funds have responded to their concerns,” says Mark Doherty, a managing principal at hedge fund consultant PivotalPath.

对冲基金经理在历史上雇用了所谓的2和20个费用结构，其中他们向客户收取2％的资产管理费，占年度绩效收益的20％。

[IIDeep Dive:The Beginning of the End for High Hedge Fund Fees?]

But that structure has come under fire from investors who feel it provides incentive for managers to grow their asset base at the expense of performance, which allows them to view their management fee as a profit center.

“There’s been pushback on management fees [charged] by some of the big firms,” says Nadel. “It arguably is a disincentive to earn your carry because you’re already making a lot of money.”

As a result, fund managers are looking to new fee structures to alleviate investor concerns.

One option, according to Nadel, is the sliding-scale fee, in which the management fee decreases as the assets under management increase. Allocators, as a result, have an incentive to invest more money in a hedge fund that offers this fee structure.

Nadel says between 20 and 25 percent of hedge fund launches over the past year are offering this fee structure.

According to Doherty, this strategy is common among startup hedge funds that want to impress potential clients with a different strategy. It’s also more common, he notes, with hedge funds that can easily raise $500 million or more.

根据Doherty的说法，从他们的创始班级筹集不到5亿美元的资金经常将这种策略翻转了这一战略。当管理层增加的资产增加时，这些资金为投资者提供了第一次分配给其基金的奖励，而不是为投资者提供首选费用。

Another strategy, according to Nadel, is to offer a fee structure that takes into account the changing nature of hedge funds.

“我们一直在看到的，特别是今年，有点增加经理，这些经理人从事长期购买和持有或活动家的战略，”Nadel说。

More funds are now offering multi-year incentive allocations. Instead of charging the same rate for management and performance every year, that rate is adjusted yearly to reflect returns over the period of the investment.

For example, if an allocator invested $1 million in a strategy that returned 10 percent in its first year but lost 50 percent the following year, the hedge fund manager wouldn’t collect $20,000 in fees for the first year, but would instead adjust its initial fee to reflect the loss in the second year of the strategy by giving investors a fee rebate.

According to Nadel, this strategy better matches incentive compensation with investor liquidity.

“Capital is more stable,” Doherty adds. “There’s value to that.”