JEAN PIERRE VERSTER: Hedge fund myths
Critics of hedge funds, like 10X’s Steven Nathan, get it wrong when it comes to these funds’ performance and accountability to investors
It is clear we still have some way to go to dispel some persistent myths around hedge funds. Last week, Steven Nathan, the CEO of prominent investment management firm 10X, which specialises in low-cost, passive investment products, made a number of misleading comments about the SA hedge fund industry. In the FM (February 21-27), Nathan is quoted as saying that "transparency of reporting … is seldom available", that the reported numbers "greatly overstate the returns achieved" and that "performance data for hedge funds is highly unreliable". This is all factually incorrect. Myth #1 — Hedge funds always charge high fees Typically, hedge funds charge a 1% basic management fee and 20% performance fee (if a cash hurdle is exceeded). Many funds offer institutional investors a zero percent basic fee with a higher performance participation rate (typically 25%) — similar to the Warren Buffett partnerships of the 1960s. Almost all hedge funds also follow the high-watermark principle, ensuring...
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