Hedge fund fees under the microscope

Hedge funds have long been both admired and criticised for their fees. If you can charge two-and-twenty and get away with it, you must be doing something right. Then again, that's a lot of money. According to a post over at DealBook, Andrew Ross Sorkin's New-York-Times-owned blog, Barclays Capital is about to release a study that "shows that investors are becoming increasingly vocal about the fees they pay hedge fund managers and they want more than just a reduction in the typical 2 percent management fee and 20 percent performance fee."

The proposals:

1) A "hurdle rate", or a rate of return a manager would have to earn above a benchmark index in order to get a performance-based bonus at the end of the year. Downside: managers might try to juice returns by taking big risks at the end of the year.

2) Don't let managers collect fees on funds that are locked in for a matter of years until the locked-in period ends. In theory at least, this would give managers an incentive not to lock up investments for longer than they needed to.