Hedge fund Fees: Element Capital Eyes 40%

August 1, 2019 | Hedge Funds

Element Capital is bucking the trend by raising hedge fund fees instead of dropping them

Hedge fund fees are back in focus after Element Capital bumped its performance fee.

Manager Jeffrey Talpins announced plans to increase its fee at Element Capital hedge fund from the already pricey 25% to 40%. However, the fund will cut its management fee from 2.5% to 2%.

Talpins is bucking the trend of firms cutting fees. As we recently reported, just 30% of funds are charging 2-and-20.

Swimming against the tide

That takes some doing in an industry where peers are buckling under pressure from investors to reduce hedge fund fees.

However, some exceptions, Element Capital included, have been able to resist such demands because of their impressive track record.

Element has generated returns of above 20% annually since 2005.

The industry standard for hedge fund fees is now 1.18%-and-14.45% instead of the much-reviled 2-and-20 structure, according to EurekaHedge.

As against this, Element’s structure will be 2-and-40.

Element Capital to curtail its size

While the company plans to increase its performance fee, it will also reduce its size. By the end of 2019, Element will reduce its fund by 20%. The firm recently slashed its workforce by 10% and eliminated its portfolio manager development program.

Reducing size is a strategy to optimize performance because bigger funds have found it challenging to make market moves quickly enough without affecting prices.

According to recent regulatory filings, Element currently holds a stake in Sealed Air Corp (NYSE: SEE) and hiked its position by 37.1% during the first quarter. The firm also hiked its stake in Amedisys (NASDAQ: AMED) by 255.78% during the same period.

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