As Nishant Kumar at Bloomberg highlighted from a recent BNP Paribas survey – gross returns generated by many multi-strat funds outperformed many of their peers in 2023 (and likely every year over the past decade). However, net of fees, performance was near the bottom of hedge fund strategy performance.
Increased fee structures employed by multi-strat funds have helped them hire the best talent, (who historically, might have chosen to launch on their own), culminating in strong and uncorrelated performance, especially in recent volatile markets. The article also points out that the survey notes that some funds have also been increasing the use of pass-through fees allowing them to charge clients for bonuses, research, and even entertainment.
To provide additional context, we shared data from our PivotalPath Multi-Strategy Index, which rose about 6% last year – toward the bottom of the Index leaderboard, though consistent with its performance over the previous 8 years. Under the backdrop of a higher risk-free rate and strong equity performance relative to multi-strat funds in 2023, investors may begin to once again become more critical of the higher fee model.
Increased fee structures employed by multi-strat funds have helped them hire the best talent, (who historically, might have chosen to launch on their own), culminating in strong and uncorrelated performance, especially in recent volatile markets. The article also points out that the survey notes that some funds have also been increasing the use of pass-through fees allowing them to charge clients for bonuses, research, and even entertainment.
To provide additional context, we shared data from our PivotalPath Multi-Strategy Index, which rose about 6% last year – toward the bottom of the Index leaderboard, though consistent with its performance over the previous 8 years. Under the backdrop of a higher risk-free rate and strong equity performance relative to multi-strat funds in 2023, investors may begin to once again become more critical of the higher fee model.