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  • msf October 2017
Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

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Larry Swedroe: Performance Fees Add Risk

FYI: A 2015 study of global pension assets from Towers Watson revealed that the 16 largest pension markets in the world increased their allocations to alternative asset classes from about 5% in 1995 to 20% in 2015.
Regards,
Ted
http://www.etf.com/sections/index-investor-corner/swedroe-performance-fees-add-risk

Comments

  • To clarify, this is not talking about performance fees of mutual funds. Mutual fund performance fees, unlike those of hedge funds, must be symmetric. If their management gets extra fees for outperforming a benchmark, then management must pay an equivalent performance penalty for underperforming a benchmark.

    In contrast, this article is about Dutch pension funds with hedge fund-like performance fees where the "fund sponsor typically only benefits from positive returns but does not suffer from losses—creating the potential for incentivizing managers to take excessive risks in an attempt to generate high returns."

    As to mutual fund performance fees, here's a Jason Zweig opinion piece:
    It's Time for Investor Fees to Go Even Lower
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