The chorus of investors complaining about hedge fund fees is getting louder as performance continues to get softer. This past weekend, the Old Gray Lady once again featured a piece on why managers are doing all they can to quiet the sound coming from investors by offering new fee structures — a new take on the two and twenty that has been the standard hedge fund fee of late, but still higher than fees charge by traditional managers.
And while I very rarely agree with the liberal-leaning New York Times, this week they may have got it right, sort of. Investors should be screaming about paying too much: Performance is bad and managers aren’t delivering, but a discount isn’t the answer. What investors should do is to take a page from the presumptive Republican nominee and tell managers that they’re fired.
Forget the discount. When a manager doesn’t deliver, the investor should redeem. The manger’s job is simple: Deliver alpha. That means doing well when markets are rising and protecting assets when markets are falling. If they can’t do that, well, guess what, they don’t deserve to be managing money. It’s really pretty simple: It’s not about fees, it’s about performance.
I have said many times that those who complain about fees are those who cannot charge them. Now it seems that investors are complaining about fees because the managers aren’t performing. Well, guess what, they’re right. Investors, beware. Just because something is on sale doesn’t mean it’s good, it just means it’s cheaper.
Things that drive me crazy
Parents have got to let children breathe. Recently, I went to drop my son off at camp and while I stood around watching him unload his duffel bag, I saw the funniest and saddest thing.A kid, probably about 10 or so, was sitting on his bed after his mommy had made it for him and watched as his mommy unloaded his duffel bag. The mom had packed each of his outfits into zip-lock bags – marked for each day of the week and stacked them neatly in his cubby – so all the young lad needs to do is to grab a bag and get dressed each morning. The boy, it seems, needs his mommy to lay out his clothes even though he is entering fifth grade this fall.
Really, need I say more? Thankfully, the camp no longer offers a lactation station, as I’m sure that the mom would be there all summer. C’mon, kids need to be kids and it’s OK if their shirts and shorts don’t match; after all, it’s camp. If you are this kind of parent, you need to leave your kids be – the result might actually shock you. All my wife and I care about is that my son changes his underwear. It’s not about the outside; it’s what’s inside that counts.