Asia LPs say fees fair, despite debate

Asian investors don’t see alternatives fund managers as too expensive, unlike their US counterparts, according to a survey from Pyramis Global Advisors, the alternatives investment arm of Fidelity Investments.

The survey, of 811 institutional investors from 22 countries representing $9 trillion under investment, revealed that 91 percent of Asian investors say hedge funds and private equity are worth the fees.

However in the US, where the Securities and Exchange Commission (SEC) has raised questions about fund managers’ fee and expense allocation policies, going so far as to say half of GPs may be charging bogus fees, only 19 percent of investors agree that GPs are good value for their money. The comparative figure in Europe was 72 percent. Unlike the US, new regulations in Europe, chiefly the Alternative Investment Fund Managers Directive, have not sparked a wide-spread investigation into fee and expense policies.

Nonetheless the fee controversy that erupted in the US is having a ripple effect across the Pacific. At PEI's Private Fund CFO & COO Seminar in Hong Kong delegates heard that Asian LPs are starting to ask more questions about their GPs fee practices.

“In general, investors always had the usual due diligence questions, which they still have. The two main items I’ve seen increase are over fees and expenses,” Roderik Mulder, chief financial and risk officer at Hong Kong-based Composition Capital said at PEI's Private Fund CFO & COO Seminar on Tuesday.

“Our survey suggests that US institutions are preparing to move back to a more traditional, back-to-basics portfolio,” said in a statement, Derek Young, vice chairman of Pyramis Global Advisors.