Fund of fund approaches exact a heavy price for alpha generation, finds Mercer in its recent fee study, but this may now start to change in the current climate.
The consulting firm's analysis suggests that a gross return of 15% a year will deliver return of 8.2% net of fees. Most fund of funds charge a management fee of 1%, although this varies considerably on mandate size, performance fees and lock-up. Performance fees of 10% are exacted on the net performance of underlying managers and base fee. In a little more than half the sample, managers calculated their