A decade of price hikes

Sun Oct 1, 2006

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 still...

ISSN: 2151-1845 / CDC10004H

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