Two and twenty is a museum piece. What you can actually charge depends on your strategy, your size, and how much conviction you can put in front of an allocator.

In short: New hedge fund launches do not charge 2-and-20. Seward & Kissel’s New Manager Hedge Fund Study of 2024 launches put standard management fees at 1.38% for equity strategies and 1.75% for non-equity, with incentive allocations averaging 17.11%, and HFR estimated funds launched in Q3 2025 at an average 1.18% management and 16.29% incentive fee. Around 70% of new equity funds now offer a discounted founder share class, and 44% of new funds carry a hurdle. The real question for an emerging manager is where inside those ranges your strategy, capacity and cost base let you sit.

Every launch deck I see still has a fee slide written as if 2-and-20 were the reference point, either “we charge 2-and-20 because we are worth it” or “we charge less than 2-and-20, look how reasonable we are”. The market moved years ago and allocators know it to the basis point. You should think about this structurally, because pricing a fund is one of the few launch decisions that is very hard to walk back later.

Fees come up in almost every manager and allocator conversation I have, from both sides of the table. These are the current numbers, and what they do not tell you.

What new funds actually charge

Seward & Kissel’s New Manager Hedge Fund Study, the annual review of the launches the firm advises on, found that funds launched in 2024 charged standard management fees averaging 1.38% for equity strategies (down from 1.48% the year before) and 1.75% for non-equity strategies. Incentive allocations averaged 17.11% of net profits across strategies. The firm’s latest edition, covering 2025 launches and reported by Alternatives Watch in July 2026, shows fees ticking back up as equity strategies took a larger share of new launches, so the direction of travel is not uniformly down.

HFR’s database tells a similar story at industry scale. Funds launched in the third quarter of 2025 charged an estimated average management fee of 1.18% and an average incentive fee of 16.29%, against an industry-wide average of 1.34% and 15.8%. New funds price their management fee below the industry average and their incentive fee slightly above it.

For emerging managers specifically, the AIMA/Marex Stacking Up survey of 180 managers published in 2026 found average management fees of 1.43% and performance fees of 16.24% among firms running up to $1 billion.

Pricing is therefore a range: management fees clustering between roughly 1.2% and 1.75% depending on strategy, and incentive fees clustering in the mid-to-high teens, with 20% still the list price more often than the paid price. With Intelligence’s Pricing Performance analysis found 69% of active funds still quote a potential 20% performance fee, while the mean management fee sat around 1.4%.

Founder discounts are the norm

If you are launching in 2026, the more useful question than “what is my fee” is “what is my fee structure”, because almost nobody launches with a single fee any more.

Seward & Kissel found that around 70% of new equity funds launched in 2024 offered a founders class, up from 49% the year before, and 50% of non-equity launches did the same. In those funds the founders class averaged a 1.13% management fee against the 1.38% standard, and a 15.83% incentive allocation against 17.11%. Early capital gets a cheaper ride, usually in exchange for capacity or a lockup.

This is now simply how new funds are priced: a headline class that anchors your long-term economics and a founders class that pays early investors for the risk of arriving first. The structure matters more than most managers realise, because the decision shapes your revenue for a decade.

Fee pressure by strategy and size

Fee pressure is not evenly distributed, and the averages hide it.

Strategy first. The Seward & Kissel numbers put non-equity launches (credit, macro, quant and multi-strategy among them) at 1.75% standard management fees against 1.38% for equity. Capacity-constrained and infrastructure-heavy strategies hold their price better, because the allocator is buying something they cannot replicate cheaply and because the manager’s cost base is visibly higher. A long/short equity fund competing with hundreds of near-substitutes has the least pricing power in the market (You Say You’re Different. You Look Exactly the Same.). A niche credit or systematic strategy with a defensible capacity story has the most.

Size second, and this cuts in a direction that surprises managers: the smallest funds face the strongest pressure on management fee and the strongest need to resist it. AIMA/Marex put the average breakeven for an emerging manager at $82.9 million in the 2026 survey, up from $70.1 million two years earlier. (I wrote about that survey in Easier to Get In. Harder to Deserve It.) Costs rose, which means the management fee is doing more survival work than it used to. Meanwhile Goldman Sachs’ allocator surveys have found investors consistently more willing to pay up for established scarcity than for new hope; coverage of the firm’s early-2024 survey of 358 allocators noted management fees at their highest since 2012 for the established end of the market even as new launches struggled. Pricing power accrues to funds that no longer need it. At breakeven AUM I have set out what that means for a launch budget; the short version is that your management fee is a solvency instrument, and discounting it could affect your survival rate.

What allocators actually push on

Managers assume the negotiation is about the headline percentages. In my conversations with allocators, and in the survey data, the pressure concentrates on structure instead.

Hurdles. Seward & Kissel found 44% of 2024 launches carried an incentive allocation hurdle, up from 15% in 2022, split evenly between soft and hard hurdles. That is a dramatic shift in three years, driven by the rate environment: when cash pays meaningfully, allocators ask why they should pay 15-20% on the part of your return cash would have delivered anyway. Goldman’s February 2024 survey coverage found about a quarter of allocators had already agreed hurdle rates and roughly half planned to request them. Expect the question, and have a position on it before the meeting rather than during it.

Crystallisation and netting. How often the incentive fee crystallises, and what gets netted against what before it is charged, moves real money over a cycle even when the headline rate never moves. Netting in its fullest form (paying incentive on winning books while losing books pay nothing back) is a multi-manager problem, and the related fight over pass-through expenses is a larger-fund phenomenon: Goldman Sachs’ mid-2024 survey of more than 300 investors found only 15% wanted to add exposure to multi-manager funds with pass-through fees, down from just over a fifth a year earlier. As an emerging manager you will rarely be asked for a pass-through. Simple and legible is an advantage.

Terms around the fee. Lockups and gates are part of the same negotiation: Seward & Kissel found 72% of equity launches and 90% of non-equity launches used lockups or gates, and 95% of new funds offer quarterly or less frequent liquidity. Fees and liquidity are one conversation, and capacity sits inside it. An allocator who cannot move you on price will try to move you on liquidity, and vice versa.

What allocators are not doing is rewarding the lowest bid. The 2026 AIMA/Marex survey found 72% of investors would consider firms below $100 million, and what they weigh at that size is the substance covered in Performance Gets You the Meeting. It Won’t Get You the Cheque., with fees as a downstream detail.

Underpricing is a signal too

The overpriced launch is easy to mock. A crowded strategy priced off a rate card written in 2006, run by a manager with no track record as an independent firm. Allocators read that as delusion, and they are usually right.

An underpriced launch fails more quietly. When a manager opens with 1-and-10 unprompted, the allocator does not think “bargain”. They run the same arithmetic I run: at that fee, what does this firm look like in year three? Can it pay a COO and keep proper compliance support? Can it afford its administrator and its auditor? Or is the founder subsidising the business from savings while hoping performance fees arrive before the money runs out? A fee that cannot support the operating base described in the same deck reads as either a firm that will be gone in two years or a manager who has not done the maths. Neither profile attracts institutional capital, a point I have made at length in the operational mistakes that kill hedge funds.

When I worked in Prime Brokerage I watched roughly four in five launches go nowhere, and pricing was rarely the stated cause but often part of the underlying one: economics that never gave the business enough runway to survive the years the raise actually takes. Price for survival first and competitiveness second.

Run your own arithmetic

The published averages are for context. The number that matters is yours, and it comes from your own variables.

Take your projected day-one AUM and multiply it by whatever management fee you are considering. That is your gross management company revenue. Now subtract your real cost base: regulatory hosting or authorisation, administration, audit, legal, data, technology, insurance, and the salaries you actually intend to pay, including your own. If you are choosing between, say, 1.25% and 1.5% (your variables, not market figures), the difference on a $40 million launch is $100,000 a year, which at launch scale is roughly a junior hire or your entire data budget. Then run the same numbers at the AUM you expect in year three, because a founders class you price today will still be paying (or not paying) for that firm then.

The arithmetic needs to give you the AUM at which you break even at your chosen fee, and the runway you have until then. Set against those the incentive-fee scenario the business needs for the risk you are taking to be worth it. If the three do not hold together, no amount of benchmarking against Seward & Kissel will save the structure. If they do, you can defend your fee in any allocator meeting, which is the actual test. You should always be able to explain your fee to an investor from your own cost base.

Cláudia

Frequently asked questions

What fees do new hedge funds charge in 2026?

New launches cluster well below the old 2-and-20. Seward & Kissel’s study of 2024 launches found standard management fees of 1.38% for equity and 1.75% for non-equity strategies, with incentive allocations averaging 17.11%, and HFR estimated Q3 2025 launches at 1.18% management and 16.29% incentive on average. The AIMA/Marex 2026 survey put emerging manager averages at 1.43% and 16.24%.

Do any hedge funds still charge 2-and-20?

The headline survives more as a list price than a paid price. With Intelligence found 69% of active funds still quote a potential 20% performance fee, but average management fees sit around 1.4% and new funds routinely discount through founders classes. Genuine 2-and-20 pricing power is concentrated in established, capacity-constrained funds, and Goldman Sachs survey coverage noted established manager fees at their highest since 2012 even while new launches struggled.

What is a founder share class discount?

A founders class offers early investors reduced fees in exchange for coming in first, often with a size cap or lockup attached. Seward & Kissel found about 70% of 2024 equity launches offered one, with founders class fees averaging 1.13% management and 15.83% incentive against 1.38% and 17.11% standard. It is now the normal structure for a new fund rather than a special concession.

Do new hedge funds need a hurdle rate?

Increasingly, allocators expect the conversation. Seward & Kissel found 44% of 2024 launches carried an incentive allocation hurdle, up from 15% in 2022, split evenly between soft and hard hurdles, and Goldman Sachs survey coverage found roughly half of allocators planned to request hurdles. A manager should decide their position on hurdles before marketing, not concede one live in a meeting.

Is it better for a new hedge fund to charge low fees?

Not automatically. A management fee that cannot support the fund’s real operating costs signals fragility to allocators, who ask whether the firm can survive to year three at that price. Underpricing reads as weakness in the same way overpricing reads as delusion. The defensible fee is the one derived from the manager’s own cost base and breakeven arithmetic.

Key takeaways

• New launches do not charge 2-and-20. Recent launch data clusters management fees between roughly 1.2% and 1.75% by strategy (Seward & Kissel, HFR) and incentive fees in the mid-to-high teens, with 20% surviving as a list price (With Intelligence).
• Founders classes are the norm: about 70% of new equity funds offer one, averaging 1.13% and 15.83% against standard terms of 1.38% and 17.11% (Seward & Kissel, 2024 launches).
• Fee pressure is uneven: equity strategies have the least pricing power, capacity-constrained and non-equity strategies the most; established funds have more than either.
• Allocators push on structure, not just rate: hurdles appeared in 44% of 2024 launches, up from 15% in 2022 (Seward & Kissel). Netting and pass-throughs are largely a bigger-fund fight, but they shape the mood at your table too.
• Underpricing signals weakness as much as overpricing signals delusion. Price from your own breakeven arithmetic, and be able to defend the number from your cost base in the room.

This publication is provided for educational and informational purposes only. The views and opinions expressed are those of the author and do not necessarily reflect those of any third party.

Nothing contained in this publication constitutes investment, legal, tax or other professional advice, nor should it be relied upon as such. Nothing in this publication constitutes an offer, invitation, recommendation or solicitation to buy or sell any security, fund or other financial instrument, or to engage in any investment activity.