Fees continue to climb, as investors grouse about lockups,
expense pass-throughs - and mediocrity
As losses at Ritchie Capital Management's
flagship multistrategy fund mounted a year ago, founder A.R.
Thane Ritchie tried to placate investors by changing his fee
structure. Instead of charging expenses to the fund, he turned
to a flat management fee of 3%, far less than the 5% to 6% that
investors had been paying when expenses were passed through.
Even so, the new fee structure was above the industry norm and
did little to appease investors as performance and regulatory
troubles continued to envelop the firm. Within a year, an
estimated billion dollars in investor capital had fled.
The moral of the Ritchie story is simple: As long as star
managers provide star performance, investors will put up with
exorbitantly high fees, in whatever form they come. Indeed,
despite constant grumbling from investors, fees are