In an article on PI Online, TorreyCove Capital Partners said that there does not “seem to be a bankable relationship” between management fees and performance. Just looking at fees, thinking that the higher they are the better the performance might be, misses the point with private equity, says the report.
First of all most funds, including those with higher fees, performed well enough to cover the higher fees. But TorreyCove’s research found a “slight negative correlation” between management fees and performance.
The snapshot of a pool of 200 hundred fund revealed that the worst-returning group, with an average performance of -8.64% as of June 30 charged higher management fees than the middle-performing group and the highest-performing group — with an average return of 25.7% — had an average management fee of 1.677%.