Hermes CEO Lowers Boom On High Private Equity Fees

Private equity funds are living in the past, when it comes to charging fees, says Mark Anson, new CEO of Hermes, and he says it’s time for a change. Anson, formerly with The California Public Employees’ Retirement System, says he has a problem with the current fee structure. It was fine, say, a decade or so ago, when p.e. firms were smaller and had to impose 2/20% management/performance combo to generate cash to run their operations.

Private equity funds are living in the past, when it comes to charging fees, says Mark Anson, new CEO of Hermes, and he says it’s time for a change. Anson, formerly with The California Public Employees’ Retirement System, says he has a problem with the current fee structure. It was fine, say, a decade or so ago, when p.e. firms were smaller and had to impose 2/20% management/performance combo to generate cash to run their operations. But not anymore, not with multibillion dollar private equity funds, which he says are making a mint without lifting much of a finger to turn a profit for investors. “It is a conflict for me,” Anson said in a speech to the Securities and Investment Institute in London. After his remarks, he told reporters that the fee issue creates problems for investors shopping for lower fees: Private equity funds that charge the most usually boast the best performance. He also took issue with recent p.e. behavior as funds flush with money are prompting them funds to get in and out of deals much too quickly. “I am beginning to get a bit worried that the turnover of companies is getting a bit too high.” Anson also had a few words for hedge funds drifting into p.e. territory, what with their efforts to effect changes in the boardroom. “It does not mean they cannot do it,” he comments, “but it hasn’t been their bailiwick in the past.”