February 15, 2011 / 10:28 PM / 9 years ago

Hedge fund D.E. Shaw cuts fees -source

* Move comes after firm returned 2.45 pct in 2010 -source

* Management fees cut to 2.5 pct from 3 pct -source

* Performance fees cut to 25 pct from 30 pct -source

BOSTON, Feb 15 (Reuters) - D.E. Shaw & Co., one of the world’s biggest and priciest hedge fund firms, has told investors that it plans to charge them less, an investor with the firm said on Tuesday.

The New York-based firm, which oversees roughly $19 billion in assets, plans to lower its fees to a 2.5 percent management fee and a 25 percent performance fee, said the person, who was not permitted to speak about the matter publicly.

Previously, the firm charged a 3 percent management fee plus a 30 percent performance fee. Most managers charge investors less, asking for a 2 percent management fee and a 20 percent performance fee.

A spokesman for the firm declined to comment.

The move comes only a few weeks after D.E. Shaw, founded more than two decades ago by David Shaw, delivered fresh disappointing performance numbers, the investor said.

In 2010, D.E. Shaw’s main fund gained 2.45 percent, the person said, lagging far behind the average hedge fund’s gain of about 10 percent and the Standard & Poor’s 500 stock market index, which climbed 15 percent. In 2009, when D.E. Shaw gained 19.9 percent, the S&P 500 rose 26.5 percent.

D.E. Shaw had long justified its high fees with double-digit returns but investors have gotten impatient with the firm in the last months and pulled money back.

A few months ago, the firm announced heavy layoffs, cutting about 150 jobs, which totaled about 10 percent of the firm’s workforce.

During the financial crisis, D.E. Shaw, like other firms, restricted investors’ access to their money in 2008, and many investors punished the firm with redemptions as soon as they could get away.

In the wake of the crisis, investors have become more demanding about terms at hedge funds, including fees and how quickly they can access their money. (Reporting by Svea Herbst-Bayliss; Editing by Gary Hill)

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