Institutional Investors Politics & Regulation

CalPERS issues memo on hedge fund "governance"


The California Public Employees' Retirement System sent its hedge fund partners a letter detailing the staff's intent to review each of its manager's relationships in 2009 and modify those management agreements and/or investment vehicles to address concerns about hedge fund "governance".

These actions may include:

• Management and/or performance fees that decline as assets grow, within either a separate/managed account or across a commingled account.

• Performance fees that fluctuate depending on the level of gross returns.

• The imposition of cash-type hurdle rates or a lower performance fee over a zero hurdle.

• A structure where performance fees "vest" and are crystallised