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Damien Hirst is apparently renovating his iconic but decaying pickled shark. The artwork’s billionaire owner, Steven Cohen, also seems to be revamping the image of his $10bn-plus hedge fund, SAC Capital. Mr Cohen’s returns are legendary but so are his fees – 3 per cent of assets plus 50 per cent of gains – and his penchant for secrecy.

The last of these changed at the weekend when a lengthy profile, with rare photographs, appeared in the Wall Street Journal. This was, no doubt, partly to counter adverse publicity. But it also reflects changes in the hedge fund industry. Smaller funds with a tight group of investors can still afford to be cagey and bet the farm. Some bigger funds manage to continue this on a larger scale, as shown by Amaranth’s huge losses.

But many larger funds are diversifying their investment styles and targeting more modest, but consistent, returns. Although not obliged to do so for now, many US funds choose to register with the Securities and Exchange Commission as a badge of legitimacy. Ratings agencies have started assessing funds for their managerial, operational, risk management and reporting competence. Fortress, a $24bn fund group, is even considering going public. This growing openness and “institutionalisation” suits relatively conservative investors, endowments, for example, which nonetheless
want exposure to the wide range of asset classes that hedge funds can dabble in.

The popularity of strategies such as long-short equity has diminished the opportunity for outsized profits. Mr Cohen admitted as much. If he cannot find new ways to maintain stellar returns, his 3-and-50 fees will look seriously steep. As hedge funds push further into the mainstream, even the more usual 2-and-20 could, like Mr Hirst’s shark, prove hard to preserve.

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