In terms of fees, benefits of scale don't tip in favor of investors.
Mon Mar 30, 2009
Despite the assumption that economies of scale would allow
hedge funds to charge lower fees as they expand their asset
base, an analysis of funds reporting to the Absolute Return
database shows that exactly the opposite happens: On average,
larger hedge funds charge higher fees.
The finding gives credence to arguments made by investors
for years that larger funds ought to decrease their management
fees. It's a criticism that has recently been expressed
succinctly and forcefully in a four-page position paper by
Larry Powell, deputy chief investment officer for the $16
ISSN: 2151-1845 / CDC10004H
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