Hedge funds should beware pressure on fees: Lipper

By Simon Meads

LONDON (Reuters) - Hedge funds should be wary of being pressured into cutting fees because of poor performance numbers during the financial crisis, a director at fund research company Lipper FMI said on Thursday.

Speaking at a briefing on trends for the fund management industry, director of fiduciary operations Ed Moisson said the industry was seeing much discussion around a potential overhaul of the standard '2 and 20' structure.

Hedge funds have traditionally charged a 2 percent management fee and a 20 percent performance fee on investments in their funds.

That system has been called into question before, but the negative returns posted in the industry during the financial crisis have escalated the debate.

According to Credit Suisse/Tremont's index of hedge funds, the industry saw overall negative returns of more than 10 percent in the third quarter.

Moisson warned against hedge funds giving in to investor pressure and lowering fees as that would bring about a "fundamental change" that would prove counter-productive.

"If that concept is put under pressure, then hedge funds will have some serious problems longer term because in principle they are selling themselves on the idea that they are delivering superior returns and you pay more for the privilege."

"If they say you don't have to pay more for the privilege then obviously that will be a concern," he said.