헤지펀드: Paul Tudor Jones’ New Hedge Fund Pitch

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Paul Tudor Jones’ New Hedge Fund Pitch: Low, Low Prices

Paul Tudor Jones for years charged some of the highest fees in the hedge-fund industry. Now the billionaire is cutting them for the second time in eight months.

The move is a dramatic retreat by one of Wall Street’s best-known investors. The former cotton trader rose to fame with a big score during 1987’s stock market crash. His fund’s only annual loss in the last three decades came during the 2008 financial crisis.

But in recent years, clients have pulled billions as Mr. Jones struggled to equal the profits of earlier years. Last summer, the firm eliminated 15% of its staff. Its flagship fund ended 2016 roughly flat despite a run-up in the U.S. stock market.

Some of Tudor’s wealthy investors objected to paying hefty fees to the hedge fund without gaining much profit in return, people close to the firm said.

Tudor responded by informing clients recently that it would now be charging as low as a 1.75% management fee and 20% of any profits, the people said. Those are down from 2.75% and 27% at the start of 2016.

Shallower fee cuts were first made last July, when Tudor dropped to a 2% or 2.25% management fee, with the lower charge for larger investments, and a 25% cut of any profits across the board.

Tudor is hardly the only hedge fund to lower the price of admission in recent months as investors turn away from an industry with persistent underperformance. Pension funds, endowments and other deep-pocketed hedge-fund backers are increasingly shifting to lower-cost, simpler investing approaches.

London’s Brevan Howard Asset Management last year told clients it would charge 0% fees for some investors. Louis Bacon ’s Moore Capital Management also reduced its management fee as a “reflection of our sensitivity to changes in the industry as a whole,” the firm said.

Just this weekend, Warren Buffett declared victory in his bet that low-cost index funds would out earn hedge funds over the span of a decade. He compared high-fee managers like hedge funds to lucky “monkeys” whose random guesses produced “a seemingly all-wise prophet.”

The average hedge fund collects a 1.49% management fee and 17.5% performance fee, down from years past, according to research firm HFR. Investors are frequently able to whittle further discounts off the sticker price.

What is particularly notable about the Tudor reductions is that Mr. Jones long helped set the pace for high fees, charging up to a 4% annual management fee and 27% cut of investment gains in various arrangements. That was among the highest in the industry.

“Times have changed,” said Trip Keuhne, a Tudor investor at Double Eagle Capital Management in Westlake, Tex.

In the past, hedge funds wielded high fees as a bragging right—a fact that “used to make them more in demand,” Mr. Kuehne said. “Now you have to come down on your fees to stay competitive and help your investors who have been with you for a long time.”

Mr. Jones first rose to prominence after making an estimated $100 million on Black Monday, Oct. 19, 1987, when the Dow Jones Industrial Average plummeted 22%. He helped launch the Robin Hood Foundation, a charity targeting poverty in New York, and was one of many managers who turned Greenwich, Conn. into a hedge-fund mecca.

For years he turned away new investors as he recorded big profits. Tudor’s flagship fund has recorded average annual return of 17% in its three decade history, after fees, compared to a 7% return for the Standard & Poor’s 500 over the same period.

The fund’s only down year in the last 30 was a 4% loss in the throes of the 2008 financial crisis thanks to a sizable cash position that year.

But in recent years Mr. Jones hasn’t been able to make a lot of money for his investors. The firm’s funds are roughly flat for the past three years. The firm cited at times a dearth of market volatility encouraged by low central bank interest rates world-wide.

Some investors began pulling money, dropping Tudor to $10 billion under management this year as compared to $13.5 billion two years ago. Investors yanked around $1 billion in the last six months alone, according to investor documents and people close to the firm. Last summer, the firm reduced its workforce by about 15%, or 60 employees including some money managers, and more staff has departed this year, the people said.

Mr. Jones has no imminent plans for retirement, people close to the firm say. Despite having set up personal residence in Florida last year, he’s still a regular presence in Tudor’s Connecticut and New York City offices, some of the people said.

Over the past year, he’s shifted to trading more of the firm’s money personally—handing off less to subordinates—and poured resources into developing more quantitative strategies like those in vogue with his younger peers.

In the fourth quarter, Tudor’s flagship fund rose 4.5%, turning around what was on track to be a losing year. In investor communications, Mr. Jones credited an increase in bets on the U.S. dollar and wagers against fixed income in the wake of the U.S. presidential election. He wrote in a recent letter he now has “stronger conviction in trading opportunities” than in the recent past.

The double fee cut is designed to ensure the firm has ample money left to drive that potential comeback, people close to him say.

“It’s been a frustrating few years, but they’re sitting on ‘go,’” said Mr. Kuehne, who is keeping his money with the firm. “Those guys who are a little gray behind the ears instead of wet behind the ears are going to do very well.”

(인용: Rob Copeland, wsj)