The US$173 billion California Public Employees’ Retirement System (CalPERS) is restructuring the relationships it has with its hedge fund managers and calling for fees to be based on long-term rather than short-term performance.
CalPERS said performance fees should be judged on a long-term basis, and mechanisms such as delayed realisations and clawbacks can better align long-term interests of managers and investors.
“We believe that investors and managers alike stand to benefit over the long term when interests are better aligned, asset controls are properly instituted, and transparency of risks and exposures is improved,” Joseph Dear, CalPERS chief investment officer, said.
Should hedge fund performance fees be measured over a longer time horizon?
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