Mercer analyses fund of fund fees


In its latest global survey of fees, Mercer found that although funds of hedge funds pay fees to outperforming managers they do not always get an offset from drag on the portfolio from underperforming managers.
Mercer points out that performance fees are still paid by the fund of funds even if the overall portfolio has underperformed. Under a positive performance scenario, Mercer estimates that two-thirds of managers return more than 25%, while one-third of managers report returns of -5%. The performance fees of underlying managers in this analysis are assumed to total a 2% base fee and 20%