Hedge fund fees are in the spotlight

Investors are paying more attention to hedge fund costs but many will tolerate additional expenses being passed to the fund as long as they are reasonable and the fund’s performance is strong.

The costs of running a hedge fund are rising as a result of increased regulation and institutional pressure for better operational standards and infrastructure. Faced with rising expenses, managers need to work out what costs they should cover themselves and what can be passed onto investors.

As there are no hard and fast rules or industry standards on cost allocation, managers have widely different views on which expenses should and should not be passed on to investors and many are left to