Kyle Bass plans to charge his usual 20% cut of profits only if he earns triple-digit returns

28 Jul, 2020 07:41
source: Singularity Financial

Singularity Financial Hong Kong July 28, 2020 – One of London’s fastest-growing hedge funds is enticing new investors by agreeing to forgo performance fees until returns hit a key threshold. In Hong Kong, a fund boss is offering to cover all losses, a concession that’s almost unheard of in this rarefied world. And famed investor Kyle Bass has told clients he’ll charge his usual 20% cut of profits only if he earns triple-digit returns in a new fund he has started.

Long notorious for charging high fees, the $3 trillion industry runs portfolios that are generally open only to institutions and affluent individuals. It’s going to extraordinary lengths to attract new money as the coronavirus pandemic triggers losses and accelerates an investor exodus that has plagued the industry for years.

Many of the world’s most prominent managers have come to the stark realization that they need to upend the “two-and-twenty” fee model that’s been a fixture for decades if they want to expand. For some smaller firms, the goal isn’t growth. It’s survival.

Billionaire Jeff Talpins’s Element Capital Management hiked its incentive fees to 40% last year and D.E. Shaw & Co. has upped the charges in its biggest hedge fund to a 30% share of gains and a 3% annual levy. But they’re now the minority.