CalSTRS CIO Chris Ailman spoke to CNBC during a lull at the Milken Institute Global Conference on Monday.
The interview featured an interesting tidbit: Ailman indicated that the two and 20 model – the traditional fee structure for alternative investments – is “dead”.
Watch the interview above.
To find yield in the current low-interest-rate environment, CalSTRS has invested in select hedge funds. But Ailman said the pension fund is not paying the alternative investment class’s notoriously high fees.
“Two and 20 is dead. People have to understand that. That model has been broken,” he said during an interview on the sidelines of the Milken Institute Global Conference on CNBC’s “Squawk on the Street.” Ailman was referring to the typical hedge fund fee structure in which portfolio managers charge 2 percent of total asset value and 20 percent of the portfolio’s returns.
Video credit: CNBC