Hedge Fund Fees Plummeted Further in 2019

Performance fees fell dramatically even as about a third of hedge funds tracked by Eurekahedge delivered double-digit returns.

(Victor J. Blue/Bloomberg)

(Victor J. Blue/Bloomberg)

Hedge funds can’t seem to win these days. Even as about one-third of hedge fund managers generated double-digit year-to-date returns through November 2019, performance fees dropped significantly last year, according to Eurekahedge.

The average performance fee for North American hedge funds dropped almost 2 percentage points between 2018 and 2019, from 16.24 percent to 14.81 percent. That’s down from 18.39 percent in 2009, according to Eurekahedge. Performance fees for European hedge funds, meanwhile, dropped from 14.36 percent to 12.63 percent. Asian hedge funds saw even larger declines, with performance fees decreasing from 18.07 percent to 15.59 percent between 2018 and 2019.

Management fees were far steadier, according to Eurekahedge. In 2018, average management fees for North American hedge funds were 1.38 percent. A year later, management fees on average were only slightly lower at 1.27 percent. Ten years earlier in 2009, management fees for North American hedge funds averaged 1.61 percent.

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In 2019, global long-short equity strategies returned 8.64 percent through November; global macro and fixed income hedge funds generated 7.33 percent and 6.82 percent, respectively. However, while the hedge fund industry may have delivered good returns, investors continued to lose faith and pull out their money, according to Eurekahedge.

Investors redeemed $131.8 billion overall in 2019, with $72.7 billion of the total coming from long-short equity strategies. Managed futures strategies, which delivered good numbers in 2019 after multiple years of disappointing returns, lost $12.2 billion. Macro suffered $18 billion in redemptions, and multi-strategy funds saw $21.4 billion in outflows.