Fund of Funds Screaming From Fees - Hedge Fund News

By Simon Jessop and Sinead Cruise

LONDON, Oct 16 (Reuters) - U.S. asset manager Principal Global Investors is to shut London-based hedge fund investment firm Liongate Capital Management after fee-conscious investors withdrew too much money from its funds.

While the hedge fund industry has hit $3 trillion on demand for alternative bets in a low-return world, investors are keen to pay less to make those bets, hitting funds that charge an extra fee for selecting which hedge funds to invest in.

"The headwinds in the hedge fund of funds industry -- fees on fees, declining assets, which I think is an industry phenomenon -- in spite of decent performance, had got us to the point where it was better, on scale grounds, to return cash to investors," said Principal Chief Executive Jim McCaughan.

Liongate, which ran $1.4 billion at the time Principal took a majority stake in 2013, had less than $500 million in assets under management, a spokesman for Principal said, after suffering "significant pressure".

Managing director Jeff Holland left the firm in July, nearly 13 years after helping found the business.