|Northlight European Credit, a start-up hedge fund manager that launched its flagship fund this week, has raised eyebrows in the hedge fund industry with its unorthodox operating model and $100 million in investor commitments. The firm, run by a team that includes former GLG Partner veterans Cyril Armleder and Charles-Henri Lorthioir, portrays itself as an alternative to the traditional hedge fund: instead of using the widely-accepted “two and twenty” formula, Northlight Captial charges a “1.5 and 15” rate. According the Financial Times, the firm will also reinvest half of its annual performance fees back into its funds together with the client’s money. The investment will remain in the fund until the investor withdraws the capital to ensure that the interests of the hedge fund run parallel to the interests of the client.|
The firm’s flagship Northlight European Fundamental Credit will price holdings using its “three-way NAV mechanism,” which will factor in transaction costs and liquidity to provide investors with greater transparency about the fund’s portfolio. Northlight’s unorthodox approach is a response to widespread demands from large institutional investors like Calpers that hedge funds act more in the clients’ interests, increase transparency, and reduce performance fees.