Fund fees: join the debate!

What is the right level of fees and carried interest for an infrastructure fund? This is one of a number of hot-button issues we ask limited partners to ponder in our Investors in Infrastructure Survey 2012. Make your opinions count!

What level of fees and carried interest do you think should be charged by infrastructure fund managers? If you’re a limited partner and this is something you feel strongly about, our Investors in Infrastructure Survey 2012 (click here) is your opportunity to express your views.

In such a harsh economic climate – and with alternative asset funds arguably facing an uphill battle to deliver the returns investors are expecting – it’s little wonder that fund economics have come under scrutiny. In Infrastructure Investor’s recent European Fund Management Roundtable, for example, it was an intriguing debating point.   

Alain Rauscher, founder and chief executive officer of Paris-based fund manager Antin Infrastructure Partners, has emerged as a stout defender of decent fee levels as a way of ensuring the ability to add value to investments. At the roundtable, he said:

“There has been some strong hostility to paying management fees and some LPs are tempted to try and take advantage of difficult fundraising conditions. But we offer a 15 percent return and a 5 percent yield, and that’s extremely competitive (and less risky) compared with other private equity models. We have a tendency to be too shy and modest in explaining this.”   

Do you have sympathy for that view? Do you believe that, unless you commit to paying managers a reasonable amount of compensation, the investment portfolio will not get the attention that it deserves?

Or, are you suspicious of the ‘secret sauce’ argument? Regardless of claims to an operational magic touch, do you think fund managers need to be more flexible when it comes to fee and carry negotiations? If so, you may be inclined to nod in agreement with Niels Konstantin Jensen of Danish pension manager ATP and Robbert Coomans of Dutch pension manager APG Asset Management when they had the following exchange at this year’s Infrastructure Investor Europe Forum in Berlin:

“I haven’t come across anything that I thought was reasonable,” Jensen said with a smile, when asked about management fees. “Now, as a starting point, 1.25 [percent], something like that, is something they can start with. And then we think it’s still unreasonable,” Coomans added, to the sound of laughter.

Whichever side of the fence you come down on, please vote now. The poll – which covers a range of investor concerns in addition to fees – will be held open until Friday 13 January 2012. The results will then be used in our forthcoming Inside the Infrastructure Fund Investor publication in February, as well as the March issue of Infrastructure Investor. So your opinions really do matter! Please vote now.