Hedge fund managers are more likely to negotiate management fees rather than performance fees, a report from eVestment says.
Of the 180 recent hedge fund investments by 50 U.S. public pension plans measured by the report, 38.8% of managers negotiated their management fees down, while only 11.3% of managers negotiated performance fees.
Also according to the report, the larger the investment, the more likely a manager is willing to negotiate its fee. The average investment with a management fee discount was $119 million, while the average investment with a performance fee discount was $133 million.
Among investments showing no change in management fees, the average size was $52 million, and the average investment size among those showing no change in performance fees was $55 million. By strategy, managed futures funds offered the lowest average negotiated management fees, offering on average negotiated fee of 0.79%, below the average stated fee of 0.96%. Macro hedge funds' average stated management fees and negotiated fees are the highest at 1.75% and 1.68%, respectively.