The 0% management fee marks one of the starkest signs yet of the pressure facing hedge funds. According to people familiar with the matter, the firm has also told clients the 0% fee will apply to any gains on the existing money they have invested in the fund, meaning that clients’ overall management fees will trend lower if the fund makes money.
Brevan will still charge a 20% performance fee on money invested in the fund, the people said.
The $ 18 billion hedge fund firm expects roughly $ 3 billion in redemptions at the end of the year, said a person familiar with the matter.
A Brevan spokesman didn’t return a request for comment on the expected redemptions.
The new terms come as investors have pulled cash from the $ 2.9 trillion hedge fund industry for three consecutive quarters for the first time since 2009, according to research firm HFR. Hedge funds have been underperforming since financial markets began their rebound in 2009, and this year on average are up 3% through July, less than half the S&P 500’s total return for the period.
While the $ 14.5 billion Master fund was a star performer during the credit crisis, notching a 20.4% return in 2008, it is on pace to mark its third straight losing year. This year through August, the fund was down 2.5%.
The new terms will have the added benefit of generating performance fees. Some of the assets in the Master fund are below their high-water mark, meaning Brevan can’t collect performance fees on those assets until investment gains make up for previous losses.
The 0% fee kicks in on December 1, and Brevan is introducing the same terms for its much smaller Multistrategy fund.
Write to Juliet Chung at firstname.lastname@example.org
This article was published by The Wall Street Journal