Hedge funds should stop charging their clients for “skill-less returns” and switch to a model that incentivizes higher levels of risk-taking instead, a group of 29 pension funds, sovereign wealth funds, and asset managers has said.
In an open letter to the hedge funds industry, the institutional investors said hedge funds are increasingly collecting “significant incentive fees” for generating returns that could be “easily obtainable” for free in the current higher interest rate environment.
Hedge funds should instead only charge fees on returns that beat the markets, by switching to a “cash hurdles” model that would see them paid for making higher returns than would be generated through “risk-free” investments….. click to read the full MarketWatch article.
