Nat Kellogg Quoted on Defending Hedge Funds

June 27, 2016

On June 27, Nat Kellogg, director of alternatives, was quoted in a FundFire article on hedge fund performance and active management fees. As Nat pointed out, defending hedge funds can be difficult when they are performing poorly. Hedge funds recorded a 0.62% loss in the first quarter, according to the HFR fund weighted index.

“Some criticism is absolutely justified and some of it is looking in the rear view mirror – knowing that being long 60/40 might have done better in recent years. But that misses the point that there may come a time when there’s more value-add,” Nat said.

Institutional investors naturally don’t pay hedge fund performance fees for poor performance. And performance fees can be a fifth of returns under a “two and 20” model. “What makes [hedge funds] high-fee is the performance and management fees, but most hedge funds are below their high water mark, so there’s not much [being paid out] in performance fees,” Nat expanded. “Institutions have to evaluate whether they’re disappointed with the manager and if a different manager will do better.”

To read the article, visit the FundFire website (subscription required).

For more on Marquette’s alternative manager research philosophy, view the video Hedge Funds – Still a Good Idea? and webinar Investment Manager Search 2013: Fiduciary Duty Deep Dive.