Barron’s – There have been headlines almost daily about hedge funds\u2019 poor performance and hefty fees. The funds, which typically levy a 2% management fee and take 20% of returns, have gained less than 3% in 2014, versus a 12.3% rise for the Vanguard S&P 500 ETF (ticker: VOO), whose expense ratio is 0.05%. But a small group of sophisticated investors say they\u2019ve found a different way to get dependable, income-like returns from hedge funds without relying on sometimes erratic returns. They\u2019re buying minority stakes in hedge funds\u2019 management companies and getting some of those fees.<\/p>\n
\u201cOur institutional investor base, sprinkled with a few high-net-worth individuals, is looking for consistent, attractive yield, which has been averaging a net 10%,\u201d says Michael Brandmeyer, co-head of the private-equity group at Goldman Sachs Asset Management, which runs Petershill Fund I, established in 2007 with $1 billion in assets. Securing a 10% rate of return in a low-rate world is no small feat.<\/p>\n