She cited the popular hedge fund wager against China’s yuan and questioned why investors are paying fees of 2 percent of assets and 20 percent of profits. “I’m kind of reflecting to myself that maybe we’re not making the right decision.”
Rubicon Fund Management’s Paul Brewer said part of the problem is that some fund had simply gotten too big to find unique ways of making money.
Smaller Managers
"Everyone’s chasing the same market opportunity" when they have billions of dollars under management, he said at the conference. "I think investors need to rethink that model," he added, suggesting that the industry could end up with more, smaller firms.
Kyle Bass, the founder of Dallas-based Hayman Capital, said uses dedicated funds for certain strategies to weather short-term losses that can cause investors to flee. For now, he said, managers are struggling to hang on as they promise better performance in the future.
"It’s easy to maintain conviction," Bass said. "It’s just how do you maintain investors?"
Graham Capital Management’s Kenneth Tropin said successful managers have already had to become more transparent, communicate more with investors and be willing to negotiate with clients on fees and structures. But there’s only so far managers can bend.
Family Office
"It’s not profitable to run a hedge fund if you charge less than it takes to run a business," said Tropin, whose firm oversaw $12.1 billion as of May 1 in wagers around macroeconomic events, both through humans and machines. “You reach a point where you may no longer be able to cut fees to where the clients want it to go."
Falling assets at Cooperman’s Omega are what’s changed his model, the money manager said. Omega oversaw $6.7 billion in regulatory assets, a measure that includes leverage, as of the end of last year, according to a government filing. The firm had managed $9.4 billion as recently as March 2015.