BlackRock's Ultra-Cheap Hedge Fund Doubles Assets in Six Months

BlackRock Inc. took a gamble by breaking the 1 percent fee barrier for a hedge fund. Now it’s paying off.

The Style Advantage fund more than doubled its assets in the first half of the year to $1.6 billion, according to an investor document seen by Bloomberg News. 

It’s one of the cheapest funds in the industry, charging a 0.95 percent management fee and nothing for performance. Investors can pull cash with only three business days notice.

BlackRock, which has joined the race to the bottom with fees on exchange-traded funds, is showing that investors crave cheap hedge funds too. 

Style Advantage, which was launched in November 2015 as part of a build-out of factor-based strategies by former Columbia University professor Andrew Ang, is the least expensive fund among 18 listed on the document.

Hedge fund managers have been cutting fees as investors pull cash after years of poor performance. Tudor Investment Corp., Brevan Howard Asset Management and Winton have all lowered expenses. 

Winton in March planned to cut its management fee to 0.8 percent and 0.9 percent depending on the size of the investment and performance fees to 16 percent.

Other hedge funds started by New York-based BlackRock in recent years, including a $519 million event-driven pool and a $628 million long-short credit offering, haven’t gathered assets as quickly as Style Advantage. 

At least thirteen BlackRock funds manage less than $1 billion, not including assets in separate accounts. Assets in six of its funds shrunk in the first half.

The funds generally charge from 1 percent to 2 percent of assets in management fees and 20 percent for performance.