The compensation model that has enriched hedge fund managers for years is not long for this world, CalSTRS Chief Investment Officer Christopher Ailman said Monday.
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.