06 June 2017

Hedgeweek: Hedge fund investor group publishes guidance on fees

The Alignment of Interests Association, (AOI) a non-profit investor-driven organisation, has released Hedge Fund Fees: Achieving Greater LP/GP Economic Alignment, a set of guidelines aimed at creating increased investor-manager alignment on the issue.

AOI’s Hedge Fund Fees guidance was developed by a committee comprised of leading institutional investors in hedge funds, including pensions, foundations and endowments, and consultants for investors in the space. The organisation said AOI’s members continue to see merit in investing in hedge funds, but not without more significant changes to the traditional fee model than simply a discounted rate. 

The paper is a result of many AOI meetings in which investor-to-investor idea sharing has contributed to better alignment between managers and investors. It is the only paper on the subject that has been published solely from the investors’ point of view, by investors. It does not seek to be prescriptive, but to provide considerations on various structures by providing examples and guidance on what has been working for both sides.

Sharmila Kassam, Deputy CIO of Employees Retirement System of Texas, says: “As GP and LP relationships continue to evolve, discussions on fees are part of that evolution and part of the institutionalisation of the industry.  AOI’s guidance serves as a thoughtful conduit to the various alternatives that exist when it comes to the construction of fee-driven relationships. Although there is no “one size fits all” solution, this white paper provides all key stakeholders with some ideas on the variety of options that exist and may work for them and their respective investment programs.” 

Since 2009, AOI has worked to advance the level of communication between institutional hedge fund investors, by facilitating the sharing of ideas on ways to improve the industry for the long-term benefit of all its participants. Its mission is to foster investor collaboration, provide an independent forum for the exchange of ideas and contribute to the sharing of educational resources among investors. AOI’s participation is generally limited to investors, allowing its members to approach issues from their shared perspective.

Full news

Executive summary of AOI_paper

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