Understanding Hedge Fund Fees: Implications for Hedge Fund Managers

K&L GATES CONTINUED PRESSURE ON TRADITIONAL FEE MODEL Institutional investors are leading the charge, along with asset allocators that view the ability to obtain lower fees as their "value add" to end clients New managers (even with a strong track records and other bona tides) are unlikely to get traditional standard fees ■ "Founder" classes (lower fees in exchange for less liquidity or a large initial investment) are being offered for longer terms and are increasingly attached to limited capacity rights Seed investors require significant fee discounts / revenue sharing Discounted fees for large subscriptions ■ Multiple classes with investors having the ability to trade lower fees for less liquidity klgates.com 8

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