Kutak Rock attorney Marc Lieberman authored a guest commentary, “The management fee charade: What’s lost is what’s unrecovered, not what’s paid,” published today in The Bond Buyer. In the opinion piece, Mr. Lieberman opines on the characterization by investors of broker management fees as a lost expense, a notion he believes the investment community should readily contest.
Mr. Lieberman writes that “hardly a day goes by without someone expressing unbridled indignation about the “outrageous” management fees collected by fund advisors. While it is certainly important for institutional investors to understand what fees they are paying to access private investments, it is simply wrong to imply that the fees paid are money thrown down the toilet, for in the usual case, such fees are fully recaptured during the course of the investment and returned to the investor with interest.”
He continues, “Our clients typically recover 100% of the management fees they paid. And that percentage is based upon actual distributions received. In our experience, between 1% and 11% of private equity investments fail to return management fees upon fund liquidation…but we suspect that most professionally-managed alternative investment portfolios will have recovery experience similar to our clients.”
The full commentary is available here. (Subscription is required)
Marc Lieberman is chairman of the investment management group. A board-certified specialist in real estate law, he directs a team of lawyers across the country dedicated to negotiating alternative investments for pension systems, sovereign wealth funds and other institutional investors.