via Bloomberg also a very interesting interview with Cliff Asness of AQR linked to the article
Top investors took hedge fund fees to task at the Milken conference Monday, with participants saying managers return too little and face a wave of closures.
Chris Ailman, chief investment officer for the $187 billion California State Teachers’ Retirement System, told Bloomberg Television that the two-and-twenty fee model is "broken" and “off the table” for large institutional investors. Neil Chriss, founder of Hutchin Hill Capital, said investors will pull out of funds that aren’t giving them returns to justify the fees.
“Reducing your fees is your best return on capital,” Ailman said from the Milken Institute Global Conference. “So we focus very much on costs in every single asset class and we’re pounding on fees across the board.”
The comments came after Warren Buffett said that investors would be better off backing U.S. businesses through low-cost funds and ditching expensive money managers. Consultants steer investors to these managers who together have underperformed what you could get “sitting on your rear end” in index funds, he said on Saturday at the Berkshire Hathaway Inc. annual meeting.
The $2.9 trillion hedge fund industry is having its worst start to a year in terms of performance and client withdrawals since 2009, when global markets were reeling from the most severe financial crisis since the Great Depression. Last week, Dan Loeb’s Third Point said that investors are “in the first innings of a washout in hedge funds and certain strategies.”
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