With plunging dispersion (across stocks returns) and soaring beta to the market, it appears an increasing number of hedge fund investors believe the masters of the universe aren't worth the money. As Bloomberg reports, nine out of 10 hedge-fund managers are overpaid as management fees don't reflect declining interest rates and fund returns, according to Unigestion Holding SA, which invests $2 billion in hedge funds. With The Fed at their back, it is hardly surprising that one fund of funds manager blasts, "the philosophy of the hedge-fund industry, as it should be, is to remunerate true talent; fund managers should be remunerated when they perform. They should not be remunerated for doing nothing."

It's not surprising; since, if alpha is all but impossible...

Then funds will take beta instead...

Funds have not been this balls deep long beta in stocks since the top in 2007

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As Bloomberg reports,

The fees, which still make up as much as 2 percent of a fund’s assets, represent a disproportionately high share of the total remuneration unrelated to performance, said Nicolas Rousselet, head of hedge funds at Unigestion. To align managers’ pay more with performance, the fund industry should either abandon the management fee or combine it with a hurdle rate that one must achieve before collecting incentive fees, he said. “The philosophy of the hedge-fund industry, as it should be, is to remunerate true talent,” Rousselet said in a telephone interview on Sept. 9. “Fund managers should be remunerated when they perform. They should not be remunerated for doing nothing.” Fees are coming down amid efforts to win mandates in an industry that traditionally charges about 20 percent on performance and 2 percent on the total assets. Investors paid an average 1.69 percent last year, with the share of those who paid 1.5 percent or more at 79 percent, almost unchanged from 2012, according to a Deutsche Bank AG survey published in February. ... “Hedge-fund managers should work harder to justify the fees that they earn.” ... Fee negotiations “continue to become a more accepted practice for investors and managers globally,” according to the Deutsche Bank survey. Seventy-four percent of respondents said they negotiate fees, up from 51 percent two years earlier. “We are negotiating with hedge-fund managers,” Rousselet said, adding that he doesn’t see management fees trending down. “But if you buy a top manager, the bargaining power is not in your hands.”

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But, there is no skill anymore as markets are entirely disconnected from fundamentals...

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Maybe after September, they will have to work harder?