The idea of a hedge fund manager taking a voluntary pay cut may seem like a laughable fantasy. But executives at BlueBay, the London-listed credit specialist, did just that this week, pruning fees on the group’s $2.7bn Value Recovery Fund. A 2 per cent annual management fee and 20 per cent of any upside has become 1 per cent and 15 per cent. In exchange, most shareholders in the fund have agreed to freeze redemptions until next July, with significantly tightened withdrawal terms thereafter.

Measures such as these are rare and risky. Funds occasionally cut fees at the outset to lure investors, but not often during the life of a fund. A few shareholders in VRF, which primarily invests in distressed debt, balked at the reduced liquidity terms. But keeping most of the money where BlueBay wants it gives the fund the flexibility to ride out the cycle; distressed strategies normally need a couple of years before they bear fruit. VRF is down about 5 per cent this year, versus a five-year average return in the low teens.