Comments on: Fooled by Fees http://allaboutalpha.com/blog/2009/09/20/fooled-by-fees/ A finance blog about hedge funds, portable alpha and alternative investing. Thu, 09 Feb 2012 19:03:08 +0000 http://wordpress.org/?v=abc hourly 1 By: James Burron http://allaboutalpha.com/blog/2009/09/20/fooled-by-fees/comment-page-1/#comment-214129 James Burron Thu, 29 Oct 2009 17:31:12 +0000 http://allaboutalpha.com/blog/?p=6132#comment-214129 This may have been why Ontario Teachers' recently eschewed all buyout funds, opting to fulfill that role internally. This may have been why Ontario Teachers’ recently eschewed all buyout funds, opting to fulfill that role internally.

]]> By: Jos http://allaboutalpha.com/blog/2009/09/20/fooled-by-fees/comment-page-1/#comment-208549 Jos Fri, 02 Oct 2009 14:28:26 +0000 http://allaboutalpha.com/blog/?p=6132#comment-208549 A great study, however with a real baised outcome. Management-fees are an advange and have to be repaid before carry (performance fee) comes in. This is not at all the case in mutual fund nor hedgefund performance figures. Second, there is a huge tenancy to offset all other fees with management-fees. In other worths this fee is offset with managementfee. Best practise of today (see ILPA guideliness) request so. Also not mentioned is the big difference in performance between the top quartile or even the pooled average versus the less performing funds. In mutual funds this is far much less. As stated in the comment before, mutiple academic studies show you should not invest in anything below pooled average. The same goes for mutual funds. Why pay more than 100 bps fee for a fund that does not beat the index, if you could buy the index for just a few basispoints. Shouldn't we not also all walk away from the mutual fund industry, as almost everybody long term does not beat the index. Great to ask attention for the high fees paid in private equity. And yes, I do believe these fundmanagers are charging far too much. Those who do not deliver net alpha to investors should not be funded. However those who do over a long period should deserve a fair pay. This goes for all of us in a capitalist world. A great study, however with a real baised outcome. Management-fees are an advange and have to be repaid before carry (performance fee) comes in. This is not at all the case in mutual fund nor hedgefund performance figures. Second, there is a huge tenancy to offset all other fees with management-fees. In other worths this fee is offset with managementfee. Best practise of today (see ILPA guideliness) request so. Also not mentioned is the big difference in performance between the top quartile or even the pooled average versus the less performing funds. In mutual funds this is far much less. As stated in the comment before, mutiple academic studies show you should not invest in anything below pooled average. The same goes for mutual funds. Why pay more than 100 bps fee for a fund that does not beat the index, if you could buy the index for just a few basispoints. Shouldn’t we not also all walk away from the mutual fund industry, as almost everybody long term does not beat the index.

Great to ask attention for the high fees paid in private equity. And yes, I do believe these fundmanagers are charging far too much. Those who do not deliver net alpha to investors should not be funded. However those who do over a long period should deserve a fair pay. This goes for all of us in a capitalist world.

]]> By: why is name required? http://allaboutalpha.com/blog/2009/09/20/fooled-by-fees/comment-page-1/#comment-206545 why is name required? Wed, 23 Sep 2009 14:56:25 +0000 http://allaboutalpha.com/blog/?p=6132#comment-206545 this is such old news. "average" buyouts underperform?? josh lerner at HBS has been saying that for more than half a decade. any PE pro worth his salt knows that. what he doesnt mention is that top-quartile funds significantly outperform. furthermore, capital is not deployed like a mutual fund, so i find this 7% number misleading and doubt whether it's calculated in a reasonable fashion. this is hyperbole from an academic hoping to get some notoriety, and is a poor excuse for a thoughtful examination of the question of fees and performance. this is such old news. “average” buyouts underperform?? josh lerner at HBS has been saying that for more than half a decade. any PE pro worth his salt knows that.
what he doesnt mention is that top-quartile funds significantly outperform.
furthermore, capital is not deployed like a mutual fund, so i find this 7% number misleading and doubt whether it’s calculated in a reasonable fashion.
this is hyperbole from an academic hoping to get some notoriety, and is a poor excuse for a thoughtful examination of the question of fees and performance.

]]> By: Tuesday links: high yield bond barrage Abnormal Returns http://allaboutalpha.com/blog/2009/09/20/fooled-by-fees/comment-page-1/#comment-206515 Tuesday links: high yield bond barrage Abnormal Returns Wed, 23 Sep 2009 12:30:09 +0000 http://allaboutalpha.com/blog/?p=6132#comment-206515 [...] Given their performance, why do people still invest in buyout funds?  (All About Alpha) [...] [...] Given their performance, why do people still invest in buyout funds?  (All About Alpha) [...]

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