WEST PALM BEACH, FL (www.hedgeco.net) – Pension fund managers across the world expect the fees they pay to hedge fund managers to fall; senior industry leaders believe such reduction may be warranted partly due to the poor performance of hedge funds to date. According to Richard Grottheim, chief executive and chief investment officer of Sweden’s AP7 retirement fund, said “Gone are the days when hedge fund managers can tell pension fund managers to pay up hefty fees.” Grottheim was speaking to conference attendees at the conference organized by Finance IQ when he made his remarks.

Grottheim’s fund manages an estimated $7 billion in total pension fund assets. He said, “When we invested three years ago it was hard to negotiate fees. It was ‘take it or leave it’. I think it is easier now with the expansion of the (hedge fund) industry taking part. The trend (in fees) will be downward,” Grottheim said.
Over the years, a growing number of pension fund managers have dedicated larger level of assets to hedge funds, following the collapse of the equity markets.  Such strategy was aimed at meeting the rising pension demands by an aging workforce.  Pension fund managers are also interested in achieving greater levels of diversification for the turbulent markets which have seen higher levels of volatility in recent times.

Hedge funds have traditionally charged between 1 and 2 percent for annual management fees and about 20 percent additional in performance fees when they meet such watermark. Performance in the hedge fund sector has slowed down in the past two years. As a consequence, industry participants such as pension fund managers argue that the level of fees charged by hedge fund managers should be reduced, particularly in light of the numerous new hedge funds, which are pilling into the hedge fund management arena.

So far in 2005, hedge funds have achieved nearly 4.2 percent in year-to-date returns according to CSFB/Tremont Hedge Fund Index, last year. Hedge funds achieved about 9.5 percent in returns for its investors. Some have charged that hedge fund managers are more interested in gathering more assets more than attaining higher returns. Pension fund managers also believe they will continue to pay such level of fees, if returns are up as

Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net

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