Quantitative investment firm Ramsey Quantitative Systems (RQSI) wants to provide investors a more transparent view of fees they are already paying hedge fund managers.
The firm is offering up a new investment fee tool call Fee-Fi-Fo-Fum that collects manager fee data and analyzes the real fees investors are paying for hedge fund performance.
The Louisville, Kentucky-based $570 million firm said it generates a fair fee structure based on the core nature of a return stream. The simple online calculator allows investors to compare their current manages’ fees to see how they compare to RQSI’s recommended model, 2-and-20 and the recently adopted 1-or-30 structure.
“We believe that fees should hinge upon the impact of the fund in the context of the entire portfolio,” said Neil Ramsey, CEO of RQSI. “Our goal is not to challenge our competitors’ fee structures, but to educate investors on how to assess management and incentive fees when making important investment decisions.
For instance, the investment fee calculator weighs criteria such as Sharpe ratio, correlation to benchmark, annualized volatility, track record length and allocation size.
RQSI said its fee approach is more nuanced in that rates are adjusted based on whether the chosen product is complementary and additive to an investor’s core portfolio. The firm recently began offering customizable alternatives to support its focus on portfolio fit by charging fees only for value-added performance.
This year RQSI launched the qubit DAY Fund, which is focused on liquid public market yield-oriented strategies, specialty finance and direct lending.
According to the firm’s March ADV filing, its own fee structures vary by fund type with management fees and performance fees different between registered fund assets and managed account assets.
According to Ramsey, the Fee-Fi-Fo-Fum tool gives insight into answering questions such as: What kind of performance would a manager need to produce to earn the standard 2-and-20? How much is an equity long/short manager that’s 40% correlated to the S&P 500 with a 10% annualized volatility and 1.0 Sharpe ratio worth? What justifies a larger expense ratio for a large cap equity ETF than a bond ETF?