Hedge fund managers are the third-biggest institutional users of exchange-traded funds and exchange-traded products, but they’re reluctant to talk about it.<\/p>\n
That’s because pension fund, endowment and foundation clients won’t be happy if the hedge fund managers they are hiring for their exceptional investment skills and for which they are paying high fees \u2014 2% for management and 20% for performance \u2014 are relying too much on lower-cost index-based products like ETFs and ETPs.<\/p>\n
\u201cInvestors in hedge funds are paying big fees for active management equity selection. If a long\/short manager goes long individual equities and only shorts ETFs and (indexes), it is a terrible deal for investors (because) fees should be a lot lower,\u201d Jim Vos, CEO, head of research and principal at hedge fund consultant Aksia LLC, New York, said in an e-mail.<\/p>\n
\u201cSingle-stock shorting is quite difficult. That’s why hedge fund managers get the big fees,\u201d Mr. Vos stressed.<\/p>\n