Hedge fund fees are the charges investors bear for investing in a fund: the manager's management and performance fees, plus fund-level expenses such as administration, custody, audit, legal and regulatory costs. Together they determine the net return.
Manager fees are set in the documents and calculated by the administrator. Fund expenses are charged to the fund at cost and disclosed, usually with a cap for launch costs. Small funds have historically had high expense ratios because fixed service-provider minimums are spread over few assets.
Allocators look at total expense ratio, at whether performance fees have a high-water mark and hurdle, and at whether any expenses are unusual for the strategy.
POD absorbs the annual minimums a standalone fund would pay its administrator, custodian and auditor at platform level, which is what makes a sub-scale fund's expense ratio workable. Manager fees are set by the manager.
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