The University of Texas Investment Management Co. persuaded about half its hedge funds to renegotiate fees, tying them more closely to performance.
The management company, which oversees about $31 billion of endowments for two public universities, said it may save as much as $45 million this year as a result of new fee arrangements. UTIMCO, as the Austin-based non-profit is known, said at a board meeting Friday that 16 funds agreed to concessions, up from five in December, representing about $5.3 billion of assets.
Pension funds and other institutional investors have been pushing back against high fees as hedge fund returns have trailed other asset classes for years. Christopher J. Ailman, chief investment officer of the $224.8 billion California State Teachers' Retirement System, West Sacramento, has repeatedly said the standard fee model — a 2% management fee and 20% of profits — should be " buried." Public pension funds in California, Kentucky, Illinois, New Jersey and Rhode Island have either cut or eliminated their exposure to hedge funds because of high costs and disappointing returns.
UTIMCO is pushing a model known as 1-or-30, where funds get either a 1% management fee or 30% of performance — whichever is higher. Ryan Ruebsahm, who oversees the group's hedge fund portfolio, said that those that have renegotiated fees are of "all shapes and sizes and strategies."
UTIMCO adopted the alternative fee arrangement last year after hiring Britt Harris as chief executive officer from the $146 billion Texas Teacher Retirement System, Austin, where it was developed.
UTIMCO hopes to get 65% of its managers to renegotiate its fees this fiscal year, which ends June 30.