Can Big Fund Investors Cut Fees?

You would think that huge institutional investors would be able to get better terms as investors than do smaller investors. To an extent, mutual funds reduce expenses to some clients who keep larger balances. This is perfectly logical and it’s legal.

But Uncle Sam is not happy about such action if it is done by organized major investors, in unison. Endowments, foundations and pension funds, as part of the group, Institutional Limited Partners Association (ILPA), use buyout or private equity funds for special deals. The group’s 215 members have more than one trillion dollars at work.

They would like to negotiate lower terms than they have been getting. But it would be against the law.