Hedge Fund Manager Hugh Hendry Has A Deal For You

Well, it's more of a deal for him, but just go with it.
Author:
Publish date:
Updated on

Can you say no to this face?

The Electica Asset Management chief has lived off of a 1.25% management fee since opening his little shop back in 2010. The only problem is, his little shop has gotten a whole lot littler, which means he’s getting a whole lot less for his work earning his dwindling number of clients almost 2% over the last three years. So he’s got an offer you can’t refuse, at least if you wish to have him continue to earn barely positive returns for you: He’ll discount the management fee by a quarter percent, and you give him 20% of everything he makes for you. Sound good?

A previous 1.25pc annual management charge will be replaced with a lower 1pc annual charge, plus a performance-related element that will give him 20pc of any positive performance….

The highwater mark can be changed, however, if the fund falls more than 30pc in any year. If this happens, the highwater mark can be lowered so that the performance fee builds from a lower starting point….

The company said it had no intention of using the clause that allows it to lower the highwater mark.

Reassuring, we know. But there is a precedent: While the Telegraph article strenuously avoids actually saying what Eclectica’s full fee structure was prior to the change, a quick Google search reveals, from no mean source, that it charged no management fee at all. But, as Eclectica helpfully explained to the people who actually broke this story more than a month ago, it could have charged a 15% performance fee if it wanted to, a little nugget that’s presumably in the prospectus if not in the marketing documents. But the point is it never did.

Star manager Hugh Hendry under fire for ‘heads I win, tails you lose’ performance fee [Telegraph]
Eclectica to charge 20% performance fee on Hendry’s Absolute Macro fund [Wealth Manager]

Related