Mercer study suggests institutional investors know alpha when they see it.
| Nov 27th, 2006 | Filed under: Hedge Fund Industry Trends | By: Alpha Male |
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Where management fees are concerned, the universe seems to be unfolding as it should. Earlier today, Mercer Investment Consulting released the results of its annual survey of global management fees. The bottom line: the market doesn’t just pay for alpha, the investment management market is the alpha market. It seems the more alpha is produced, the higher the fees. But rather than describing this situation as “paying for higher quality”, we would argue customers are simply buying more “product” (i.e. more units of alpha). In other words, the price per unit of alpha may actually be stabilizing (or falling) for all we know.
Says Mercer’s press release:
“According to Mercer’s study, which covers 164 traditional and alternative institutional investment strategies, fees are highest in classes where asset managers have the most potential to outperform.”
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