The topic of yesterday's FT article on new analysis questioning fees by private equity managers is part of a wider focus, particularly by public pension plans, on fees levied in the alternative asset class and value for money.
Of particular interest is that this also ties in with a greater scrutiny by investors on how exactly fees are calculated. We are seeing new business lines being opened by service providers in the industry offering fee validation products to investors, under which they analyse fees paid by investors to make sure that they have been determined correctly and in line with the underlying fund documents.
As well as the general pressure on fees, there is an expectation that more of managers' time will be spent addressing fee calculations and other fee-related queries.
US private equity managers have extracted $400bn in fees and expenses from investors since 2006 but on average they failed to beat the returns from an S&P 500 tracker fund, according to a new analysis... Investors, however, have difficulty in assessing value for money because of complex and opaque agreements that allow private equity managers to charge multiple layers of hidden fees.