Eze Software Debuts 1/30 Hedge Fund Fee Module

Oct 4 2017 | 7:16pm ET

Investment industry technology specialist Eze Software has unveiled new functionality in its Eze Investor Accounting solution that helps hedge funds calculate and collect incentive fees within an increasingly popular “1-or-30” structure. 

The move comes amid increasing pressure from investors to find alternatives to the traditional “2-and-20” fee structure that better align with the need for consistent investment performance.  The 1/30 structure uses the total fee limit method to ensure that the investor retains 70% of the profit generated for their investment in a hedge fund, capping the total fees to the manager at no more than 30% of gross profits over a period of time. 

The model analyzes the management and performance fees for a time period versus a portfolio’s performance and limits the negative impact from fees on an investor’s alpha in underperforming years. Popularized by the Teacher Retirement System of Texas, the approach has been generating interest among allocators. 

The company’s Eze Investor Accounting platform has automated this calculation and analysis, ensuring that managers can efficiently review the total fee inputs and results, and report consistent and accurate fees to their allocator clients, Eze Software said in a statement. The system avoids the need for back offices to manually calculate and track the 1/30 model, and allows the manager to rapidly respond to any investor queries regarding fees. 

“This is a very difficult calculation to be able to track manually through Excel,” said Bill Neuman, Eze Software's managing director for product management & development. “Because the fee structure requires tracking cumulative performance against benchmark over time, the market needs technology to manage continuous rebalancing. With this tool, we are responding to demand for the delivery of a clean capital balance with minimal processing.”

Headquartered in Boston, Eze Software is a global leading provider of investment management software solutions designed to optimize operational and investment alpha throughout the entire investment process. The company services more than 2,500 buy-and sell-side institutions in 45 nations from 15 offices worldwide, including broker-dealers, endowments, family offices, hedge funds, institutional asset managers, mutual funds, pension funds, and wealth managers across a range of investment strategies.

In Depth

PAAMCO: Will Inflation Deflate the Asset Bubble?

Jan 30 2018 | 9:49pm ET

As the U.S. shifts from monetary stimulus to fiscal stimulus, market pricing should...


CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Boost Hedge Fund Marketing ROI By Raising Your ROO

Feb 14 2018 | 9:57pm ET

Tasked with delivering returns on client capital, a common dilemma for many alternative...