By Joseph A. Giannone
NEW YORK, July 1 (Reuters) - Investors up in arms about the high fees and secretive ways of hedge funds have found an unlikely ally -- veteran money manager Brian Singer.
Two years after leaving UBS Global Asset Management, where he managed $200 billion in assets as Americas chief investment officer, Singer announced on Wednesday the launch of Singer Partners LLC. He believes the new firm, which will manage about $1 billion initially, could grow to $15 billion over time.
To help get him there, Singer is challenging some long standing industry practices, including the standard 2 percent management fee and 20 percent of annual fund profits.
"The industry is begging for some level of integrity in performance fees that they haven't seen in the past; performance fees that actually align the interests of managers and clients," Singer said in an interview. "The 2 and 20 fees don't do that."
Instead Singer Partners will charge a 1 percent management fee and 20 percent for performance, but only after five years and only for performance that exceed Treasury returns adjusted for market conditions.
Other policies that will surely alienate peers is Singer's promise to provide transparency, a key consideration after many investors were stung by losses and the Madoff scandal.
"We're forming a partnership with our clients. We're not here to make money every single month or every quarter. We take risks and sometimes we'll be wrong."
Hedge fund managers, used to holding all the cards, are under pressure to offer better terms to investors after last year's lock ups, redemption gates and poor returns.
UBS PARTNERS
Singer, who learned his craft at Chicago's Brinson Partners, a money manager that has been part of UBS and its predecessors for 15 years, will be chief investment officer. Other founding partners from UBS include Edwin Denson, former UBS head of asset allocation; Thomas Clarke, head of currency analysis and strategy; Edouard Senechal, senior risk manager; and Renato Staub, senior asset allocation and risk analyst.
In the near term, Singer is trying to nail down two anchor investors: a private bank and an institutional investor, such as a sovereign fund. Over time Singer expects the firm's assets to expand to $15 billion.
Aside from trying to outperform the market through some long-term, contrarian bets, Singer plans to strike a better balance with clients. The fund will offer "100 percent" transparency, impose no lock ups and let investors redeem shares each quarter.
The fund will charge an exit fee that reflects the size of assets withdrawn. Singer said these fees will go back into the fund to compensate other investors.
Singer is venturing on his own at a turning point in the hedge fund business, when two decades of rapid growth gave way to last year's credit crunch. Losses and record withdrawals forced dozens of fund managers to shut down and has made it difficult for even talented traders to launch firms.
Although conditions have improved since Lehman Brothers collapsed last fall, it is still a tough time for managers to get off the ground. But Singer, who traveled the globe during the past year meeting investors, says people are starting to rethink their portfolios.
"That's not to say hedge funds are bad, but what investors really need is more appropriate fees, transparency and liquidity, the things they didn't get," he added. (Editing by Andre Grenon)