Private equity firms outperform hedge funds

Hedge funds are back in fashion

Too expensive and too little return - that was the reputation of hedge funds for a long time. The pendulum is now swinging in the other direction, and investors are once again very hungry for these alternative investments.

Investors are happy with the performance their hedge funds performed in 2017. According to Credit Suisse, three quarters achieved or exceeded their goals with these investment vehicles. As a result, investors have raised the target return for the third time in a row, and it is now a hefty 8.53%.

Given the prevailing low interest rate environment, it is not necessarily surprising what the latest Credit Suisse study on hedge funds found with such figures. These saw the greatest increase in demand among the various alternative investments among investors, from 12% last year to 28%. This makes hedge funds one of the most popular unconventional investments, along with private equity. The CS study also shows that the search for returns has led to the fact that, for the first time ever, alternative investments are more sought after than traditional strategies.

Falling fees

The fact that hedge funds are now popular again has, in addition to the good results of recent times, to do with the fact that fees have become cheaper. A few years ago the 2/20 model was common. A hedge fund collected 2% of the invested money every year as fees; In addition, however, he demanded 20% of the profit that may have been made.

This has changed. Only 3% of hedge fund customers now pay 2% in fees, and only 16% of customers today still pay 20% of profits as an incentive. According to the CS study, the average is 1.45 and 16.9%, respectively. That is still a proud price; but many investors are apparently willing to pay it, confident that their hedge funds will deliver good results, as they have done in recent years.