Nine out of 10 hedge-fund managers are overpaid as management fees don’t reflect declining interest rates and fund returns, according to Unigestion Holding, which invests $2 billion in hedge funds.
Bloomberg News reports that the fees, which still make up as much as 2% of a fund’s assets, represent a disproportionately high share of the total remuneration unrelated to performance, said Nicolas Rousselet, head of hedge funds at Unigestion.
To align managers’ pay more with performance, the fund industry should either abandon the management fee or combine it with a hurdle rate that one must achieve before collecting incentive fees, he said.
'The philosophy of the hedge-fund industry, as it should be, is to remunerate true talent,' Rousselet said in a telephone interview on Sept. 9. 'Fund managers should be remunerated when they perform. They should not be remunerated for doing nothing.'
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