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