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
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.