Hedge funds are charging a whopping 80% more in fees than actively managed offshore equity mutual funds, according to a research report issued Monday.
Fitzrovia International, a London-based financial research firm, said that investors in some 420 hedge funds paid an average of 3.94% in fees last year compared with 1.79% charged by the average actively managed offshore equity fund.
The data illustrates that hedge fund clients were paying more than equity fund investors for significantly lower returns. In November, the CSFB Tremont Hedge Fund Index was up 13% year-to-date whereas the S&P 500 index posted a 22% gain.
The firms analysis of fees included management fees, total expense ratios and performance fees. While expense ratios were in the second lowest fee quartile, management fees were among the highest with a 2% average. On top of that, their performance fees can range anywhere from 5% to 30% of net gains, according to the poll.
"With growing European regulatory and retail interest in these products, the spotlight will be turned increasingly on the clarity and comparisons of fees for alternative investment funds," said Ed Moisson, associate director at Fitzrovia.
The surveys respondents managed $62 billion in assets and were based in Bermuda, the British Virgin Islands, Cayman Islands, Dublin and Luxembourg.