Goldman’s Hedge-Fund Sweetener Revealed

We bloggers like to speculate, and on Monday I hazarded

a guess that the don’t-call-it-a-rescue injection of liquidity into Goldman

Sachs’s Global Equity Opportunities hedge fund would reward investors with lower

fees than would normally be available to them. Specifically, I guessed that

Goldman wouldn’t charge a performance fee until the fund hit its high-water

mark.

I

was half right.

Bloomberg’s Christine Harper reports today that the fund’s

2% management fee is being waived entirely, and that the performance fee is

being cut in half, to 10%. On top of that, the performance fee doesn’t kick

in for the first 10% of appreciation – essentially the high-water-mark

trick that I was talking about.

In fact, this deal could end up being significantly sweeter for investors than

the deal I guessed they were being offered. It’s not clear from the Bloomberg

article, but it seems the 2% management fee is being waived entirely, not just

for the initial period of appreciation but for as long as the investment is

kept in the hedge fund. That’s huge.

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