Over the past few years, the hedge fund managers have tried to lure new investors by structuring SMA accounts, matching management fees of other funds even lowering their management fees from the typical 2/20 structure to a 1/10 arrangement.

In a recent article in the Hedge Funds Review, author Joanne Harris further explores hedge fund and hedge fund of fund fee structures.  According to the article, “ the average management fee charged by single-manager funds at the end of 2009 was 1.65% with an average performance fee of 18.89%, according to a report by information provider Preqin.”

The article continues, “for fund of hedge funds (FoHFs) the average management fee is 1.44% and the average performance fee is 11.54%.  A total of 38% of single manager funds stuck with the 2 and 20 structure that is still seen as traditional for hedge funds.  Between the second and fourth quarters of 2009 the proportion of single managers charging 2% management fees dropped from 54% to 40%. The proportion charging between 1.5%-1.99% rose from 22% to 33%.”

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