More Alternatives More Fees

As sovereign wealth fund investors and public plans continue to embrace alternative asset classes such as real estate, infrastructure, hedge funds and private equity, manager fees will gobble into their returns. By analyzing a sample of fiscal year 2011 public investor financial statements, one can see that alternatives make up a major portion of fees paid. Diversification has its hefty price; furthermore, not many public funds can hire full-time professionals in every field.

Running a complex-strategy for a public fund, investing in a variety of asset classes will push up manager fees. The Future Fund’s indirect cost ratio is the ratio of the fund’s total management costs to the fund’s average net assets. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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