Two and 20 is dead, we’re told. Been dead for a long time. The industry averages agree, saying that the standard rate for having hedge funds produce average to below-average returns is now the much less symphonious 1.5 and 17.
Some hedge fund managers—you know, the good and famous ones—can still get two and 20 or above. Some even add a third layer of fees for business costs that one might reasonable assume would be covered by the management fee but isn’t.
Well, hedge fund managers don’t get much better or notorious than Steve Cohen. Back before his unfortunate run-in with Preet Bharara, S.A.C. could fetch 3 and 50. Plotting his comeback, however, he’s willing to settle for a little less.
Billionaire trader Steven Cohen, who may stage a comeback to the business next year when his regulatory ban on managing client money expires, has considered charging management fees of at least 2.75 percent…
In annual incentive fees, Cohen may take a cut of profits ranging from 10 percent to 30 percent, said the people.
Now, if that sounds like a lot for your run-of-the-mill hedge fund manager but not quite enough for Steve Cohen to live on, you’re right. Because in addition to charging nearly twice what the average hedge fund manager charges to cover things like trading costs and rent and coffee and hot dogs, the Big Guy’s got a few other little charges planned for the small print.
Cohen is taking an unusual approach by passing on some costs in addition to charging a fixed management fee. A handful of hedge funds such as Israel Englander’s Millennium Management push business costs to clients instead of a fixed management fee. For Millennium, those costs have averaged about 5 percent to 6 percent annually over the past 15 years.
Marketers for Stamford Harbor have discussed with potential clients terms that may involve locking their money up for one year and imposing a penalty of 7 percent if they need to withdraw their capital in that period, the people said.