(Bloomberg) - Izzy Englander’s Millennium Management has changed its terms to ensure that clients always pay a minimum fee, even if the hedge fund loses money.
They will now pay annual fees of about 1% of assets or 20% of investment gains — whichever is greater, according to a client letter seen by Bloomberg. It’s part of an effort to “reflect current industry-standard approaches” adopted by other multi-strategy peers, Millennium said in the Feb. 21 letter.
The change means that if the firm loses money or generates an annual return of less than 5%, it’s still guaranteed fees equal to about 1% of client assets, amounting to hundreds of millions of dollars. Since its founding in 1990, Millennium has only returned less than 5% in two years: 2008 and 2016.
Millennium, like most of its competitors, also passes along to clients expenses that include portfolio-manager compensation and legal and accounting costs.
A spokesman for the New York-based firm, with $58 billion of assets under management at the end of February, declined to comment.
The new terms align with Millennium’s broader push to create a stable business that’s unencumbered by frequent redemptions or big reductions in annual income. The firm recently completed a plan to lock up client capital for longer, extending the full redemption period to five years from one. Its executives view reliable capital as a key tool to attract and retain talent and invest in technology and infrastructure, among other things.
If Millennium does end up charging 1% of assets, the fund will have to recover what clients paid before levying a performance fee the following year, according to the letter. The fee changes will take effect on or around July 1.
Millennium also removed a so-called key man clause that allowed some investors to redeem if Englander, 74, had left the firm or was no longer able to run it.
By Hema Parmar and Nishant Kumar
Assistance from Sridhar Natarajan
