Hedge fund investors are fussy about fees

Calculating feesHedge fund fees are coming under more scrutiny, according to a poll that found investors have little tolerance for extra expenses.

Deutsche Bank, which surveyed 70 investors with a combined hedge fund allocation of more than $730 billion (€540 billion), found that investors are unhappy about expenses such as employee pay, marketing and non-research-related travel being charged to funds.

Deutsche Bank says 64% of respondents will investigate miscellaneous expenses and may place limits.

The five most frequently cited red flags among investors are an unwillingness to provide transparency, inadequate compliance policies, poor segregation of duties, lack of experience in critical roles and inappropriate valuation policies.

While 65% of the investors polled have the right to block an investment entirely, 81% are willing to take a consultative approach to allow a manager to remedy a deficiency and re-engage with them.

The poll was conducted among consultants, endowments, public pensions, government organisations, insurance companies, funds of funds, private banks and family offices. Nearly three-quarters of respondents have more than $1 billion each in hedge fund assets.

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