Hedge Fund Giant Brevan Howard Cuts Some Fees to 0%
26 September 2016 - 5:00PM
Dow Jones News
Brevan Howard, one of the largest hedge funds in the world, will
stop charging a management fee in its flagship fund for new money
from current investors.
The 0% management fee marks one of the starkest signs yet of the
pressure facing hedge funds. According to people familiar with the
matter, the firm has also told clients the 0% fee will apply to any
gains on the existing money they have invested in the fund, meaning
that clients' overall management fees will trend lower if the fund
makes money.
Brevan will still charge a 20% performance fee on money invested
in the fund, the people said.
The $18 billion hedge-fund firm expects roughly $3 billion in
redemptions at the end of the year, said a person familiar with the
matter.
A Brevan spokesman didn't return a request for comment on the
expected redemptions.
The new terms come as investors have pulled cash from the $2.9
trillion hedge-fund industry for three consecutive quarters for the
first time since 2009, according to research-firm HFR. Hedge funds
have been underperforming since financial markets began their
rebound in 2009, and this year on average are up 3% through July,
less than half the S&P 500's total return for the period.
While the $14.5 billion Master fund was a star performer during
the credit crisis, notching a 20.4% return in 2008, it is on pace
to mark its third straight losing year. This year through August,
the fund was down 2.5%.
The new terms will have the added benefit of generating
performance fees. Some of the assets in the Master fund are below
their high-water mark, meaning Brevan can't collect performance
fees on those assets until investment gains make up for previous
losses.
The 0% fee kicks in on Dec. 1, and Brevan is introducing the
same terms for its much smaller Multistrategy fund.
Write to Juliet Chung at juliet.chung@wsj.com
(END) Dow Jones Newswires
September 26, 2016 11:45 ET (15:45 GMT)
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