Hedge funds have charged investors a staggering $1.8 trillion in fees from 1969 through December 2024, according to new data released by LCH Investments, a prominent hedge fund investor, on Monday. The report reveals that over the past 55 years, hedge funds have retained approximately half of the trading profits they generate.
LCH, which is part of Edmond de Rothschild, noted that the top 20 performing hedge funds charge higher fees but deliver superior returns and experience fewer investor withdrawals. On average, this group has taken just 34.3% of their profits before fees during this period.
Rick Sopher, chairman of LCH Investments, emphasized the downside for investors when hedge funds incur losses. “When hedge funds make losses, the performance fee paid on the way up is not refunded. If the fund closes or investors redeem before losses are recovered, investors can end up paying disproportionately high fees,” he explained in a call with Reuters.
According to hedge fund research firm HFR, 326 hedge funds closed their doors in the first three quarters of last year. Smaller hedge fund managers often struggle to recover from poor performance and investor outflows, as losses must be recouped in subsequent years.
Brad Amiee, head of research at LCH Investments, pointed out that the fees paid by investors as a proportion of hedge fund gains remain notably high.
The report also highlighted that the top 20 performing hedge fund managers earned a total of $93.7 billion in net returns after fees in 2024 alone. Among the top performers was multi-strategy hedge fund D.E. Shaw, which had its best year ever, delivering $11.1 billion to investors after fees. Additionally, British hedge fund Marshall Wace made its first appearance in the top 20, returning $4.5 billion to investors.
Both D.E. Shaw and Marshall Wace declined to comment on the report.
Sopher also revealed that LCH, the world’s first fund of hedge funds founded in 1969, is set to close later this year, although Edmond de Rothschild will continue to invest in hedge funds through other funds within the group. Since its inception, LCH has delivered an average annual return of approximately 10%.
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