A hedge fund of funds, which is partly owned by the British Telecom Pension Scheme, says it seeks to lead industry behaviour with a new fee structure.
Hermes BPK Partners said today that it would make its fee structure available to institutional investors and pensions funds globally from the 1st January 2011.
The new model allows re-imbursement to the client of performance fee overpayment in underperforming years, resulting in fees being paid only on the gains achieved.
The firm says this mechanism is designed to ensure that alignment between investor and investment manager is maintained over the long term.
Mark Barker, a founding partner and joint CIO of Hermes BPK, said: “The introduction of this unique three year performance fee structure provides greater alignment of interests with clients who take a long term view with regard to their investments.”
In November 2009, Matteo Perruccio, CEO of Hermes BPK Partners, told Funds Europe about the fee plans.
“We are the first fund of hedge funds that we know of to launch a share class with a three-year pricing model. This aligns us more with our institutional investors," he said at the time (Funds Europe, November 2009).
“We will only take one-third of the performance fee at the end of the first year, and the remaining fees are held in escrow. If the following year we are below the watermark we won’t take the other two-thirds until we are above it.”
Administratively, the fee structure presented many challenges. For operational reasons it can be difficult for funds of hedge funds to treat investors fairly. For its fee model, Perruccio said a deep knowledge of series-shares accounting came in handy. Every time an investor comes into a fund a new fee is created that has to be kept track of.
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