Ex-UBS fund manager's new firm defies 2 & 20 rule

By Joseph A. Giannone

NEW YORK (Reuters) - Investors up in arms about the high fees and secretive ways of hedge funds have found an unlikely ally -- veteran money manager Brian Singer.

Two years after leaving UBS Global Asset Management, where he managed $200 billion in assets as Americas chief investment officer, Singer announced on Wednesday the launch of Singer Partners LLC. He believes the new firm, which will manage about $1 billion initially, could grow to $15 billion over time.

To help get him there, Singer is challenging some long standing industry practices, including the standard 2 percent management fee and 20 percent of annual fund profits.

"The industry is begging for some level of integrity in performance fees that they haven't seen in the past; performance fees that actually align the interests of managers and clients," Singer said in an interview. "The 2 and 20 fees don't do that."

Instead Singer Partners will charge a 1 percent management fee and 20 percent for performance, but only after five years and only for performance that exceed Treasury returns adjusted for market conditions.

Other policies that will surely alienate peers is Singer's promise to provide transparency, a key consideration after many investors were stung by losses and the Madoff scandal.

"We're forming a partnership with our clients. We're not here to make money every single month or every quarter. We take risks and sometimes we'll be wrong."

Hedge fund managers, used to holding all the cards, are under pressure to offer better terms to investors after last year's lock ups, redemption gates and poor returns.