Sunday 7 February 2016

Pay More Fees(?)

I find TED Talks a good way to pass the time, especially when sitting in traffic. I recently stumbled across a TED interview with Jim Simons - founder of Renaissance Technologies. Apart from being brilliant and incredibly successful, he also charges one of the highest (if not highest?) fees in the industry. Get this: Renaissance charge 5 & 44 (see around 15.40 in the talk). What the? That means they charge 5% of FUM plus an additional 44% in performance fees. That makes the standard 1-2 & 20 look like chicken feed.

I don't know the exact performance of Renaissance, however every number I've ever heard make you blush. Reportedly, their flagship fund has returned 35% for over 20 years - net of fees. You'd be happy to pay 5/44 for that sort of performance, and their pre-fee performance is off the charts. 

It reminds me of 2014 when a friend and I went and watched the Monaco GP. Right along the front of the harbour are the really big boats (as opposed to the guys worth just a few hundred $m around the sides of the harbour). One afternoon we Googled the owners of the monster boats and it turned out that Sea Owl (a 62m Super Yacht) was owned by Robert Mercer; one of the co-managers of Renaissance. No wonder he can afford that sort of boat with that sort of performance and fees.  

All of this makes the Australian union superannuation marketing around the benefits of lower fees just a little bit incomplete. Sure, a lot of hedge funds don't add value over the long term, but there are anomalies - there are some who charge exorbitant fees and deliver exceptional performance. 

Kristian