The Hedge Fund Report: Graduating From Harvard

Another development garnered less attention, although it reflects a growing trend among large financial institutions. The insurance company is making a push into hedge funds. One of its subsidiaries, AIG Financial Products, a derivative and currency trader, bought 4.3% equity stake in British hedge fund Aspect Capital. AIG will retain an option to acquire an additional 8% stake in Aspect and to provide $125 million in additional seed capital for Aspect, a quantitative hedge fund shop.

No Bargains

Sol Waksman, founder of the Barclay Group, a hedge fund index provider, doesn't buy all that talk about hedge funds dropping their fees under market pressure. "I had been reading so many things about this that I was wondering if it was correct. But it's not based on reality," he said.

Waksman did a study based on a population of new funds for each year from 2001 to 2005. "Managers don't raise their fees on existing funds. They close to new investors and start a new fund. So the cleanest way to get a measurement on whether the fees are going up or down was to look at new vehicles," he said. What he found is that fees remain higher across the board.

For domestic funds, incentive fees rose from 19% to 19.6% from 2001 to 2005. For offshore funds, the increase during the same period was from 18.5% to 19.6%. The same applied to funds of funds with incentive fees up from 7% to 8.85%. Only management fees for funds of funds tend to decrease slightly.

Givebacks

A mob of 1,200 hedgies gathered in New York last week for a fund-raising event organized by Hedge Fund Care, a business group devoted to fight child abuse. Price for a table: from $10,000 to $25,000. Amount of money raised: $1.7 million.