The survey's authors say managers are battling harder to show their own financial interests are in tune with those of clients.

A study of 118 hedge fund managers shows that the traditional “2 and 20” fee model (annual management charge and performance fee, respectively) has been dead for some time. 

On average, funds now have an average 1.3 per cent management fee, with 80 per cent of them willing to sacrifice that fee if it gives them a bigger slice of performance, according to a study from the Alternative Investment Management Association and RSM.

The $3.0 trillion-plus hedge fund industry, while it has had its bright spots in recent years, has generally been on the defensive since 2008, lagging in broad terms behind global equity markets and hence raising questions about the fees earned. Legendary investment figure Warren Buffett, for example, has criticised hedge funds’ fees as not worth what they add in value.

“Discussions with managers and investors during the research reveal a shared belief that managers’ share of profit should be about one third,” the report said.

More than 75 per cent of managers see a mutual desire for a long-term investment commitment or an exchange of knowledge with investors as essential, the study, showing other details, found. It also showed that it is crucial for firms to be aligned financially with what investors want – some 76 per cent of surveyed managers say that it is important for them to have their own capital in the funds they run.

Nearly all respondents have a performance fee high-water mark with their investors and almost 40 per cent use hurdle rates to set a minimum return for client(s) before a performance fee can be charged, the study showed.

The respondents together oversee about $440 billion in assets under management.