> 2) As a fund manager, you probably like fund > investments better. When you have managed > accounts, the accounts are all over the place at > every different broker in the world. In the > futures world that means that you need to have > give-up agreements in place so you can do one > transaction and then distribute the transaction to > each account. It’s a pain. You might also care > about making your trades transparently (like if > you took all the trades and did them at T+1 would > your performance be 2/20 worse?) excellent post, joey! btw joey, how do you then track down the returns for each investor in the fund… Each investor would have different share classes from different subscription periods and the problem just get compounded with each performance crystallization… I know this problem should be handled by the administrator, but my boss (the fund manager) keep asking me to think of a solution
dreary was this a cold call? do you have money with the place he works for? how did he come to call you?
I can’t give details, but this is an email distributed by an advisory service to all its clients. They have done a lot of business in the past.
itmonkey Wrote: ------------------------------------------------------- > > 2) As a fund manager, you probably like fund > > investments better. When you have managed > > accounts, the accounts are all over the place > at > > every different broker in the world. In the > > futures world that means that you need to have > > give-up agreements in place so you can do one > > transaction and then distribute the transaction > to > > each account. It’s a pain. You might also > care > > about making your trades transparently (like if > > you took all the trades and did them at T+1 > would > > your performance be 2/20 worse?) > > excellent post, joey! > > btw joey, how do you then track down the returns > for each investor in the fund… Each investor > would have different share classes from different > subscription periods and the problem just get > compounded with each performance > crystallization… I know this problem should be > handled by the administrator, but my boss (the > fund manager) keep asking me to think of a > solution I would never trust an administrator to do anything unmonitored. Do you think that the world’s best and brightest go off to be fund administrators? Anyway, it doesn’t usually work that way (although I’ll bet some people have that deal). Generally, the fund pays incentive fees based on the fund’s high water mark irrespective of how much money is in the fund. That means that if the fund has a high water mark of 200 and then drops to 180, if you invest in the fund at 180 you get a no-incentive fee ride to 200. That’s a bad thing from your income point of view, but a marketing plus. When you are down, you can tell people that it’s a good time to invest because they will be paying low fees until they have made, say, 20%.
Most hedge funds I have seen (all european based - so might be different) have performance fees per investor. So the fund works by paying incentive fees based on the high water marks and fund performance, but then each investor is evened out by receiving equalisation or contingent redemptions with their purchase that last until the next crystallisation event above the high water mark. The newer UCITS-compliant funds that are essentially hedge funds tend to work the way joey says. Apart from the embuggerance of the administration of equalisation and contingent redemptions, I prefer the per investor model for precisely the reason that the manager has a better income stream - if he ends up below the HWM he doesn’t such an incentive to chase it to get the incentive fees back.
I wonder if this has changed in the past few years, or it’s different in Europe and the US, or I’ve just been around the wrong funds or what.
well, at least for my company, the fee structure don’t work that way. Nobody gets a free ride, each subscription belongs to a different share class with its own highwater mark, which is precisely why tracking down the performance for each investor gets tremendously complex… administrators aren’t exactly helping either…
Might have something to do with the fact that funds over here tend to be structured just like mutual funds, just with a restriction on promotion to professional investors & HNW individuals, so we don’t have to go through the shenanigans that US ones do.
it are you in US or over there?
i am in east asia, but we have US, european investors