The hedge fund fee structure just took another blow

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The heat on hedge fund fees is getting turned up, and one major player has made a significant capitulation.

Facing investor redemptions and faltering performance, Brevan Howard, the London-based firm with a $14.5 billion flagship fund, is telling existing clients that it is waiving its management fee, CNBC has confirmed. Clients still will be charged a 20 percent performance fee. The change will not apply to new investors and will take effect Dec. 1.

Brevan Howard's Master fund reportedly had declined 2.5 percent through August.

Brevan Howard representatives declined to comment.

The move comes amid increased pressure on the $2.9 trillion industry to reform its controversial 2-and-20 fee structure. Industry data tracker Preqin noted that "lower recent performance, high-profile redemptions and increased concern from investors on the issue of fees have influenced many hedge fund managers to bring their management and performance charges below the 2 and 20 'industry standard.'"

In fact, only 35 percent of the funds that Preqin tracks still use 2-and-20. The average management fee is now 1.57 percent, though the performance fee remains at a relatively lofty 19.29 percent. Newer funds have moved even lower, with average fees of 1.53 percent and 19.13 percent, respectively, Preqin reported.

A recent Preqin survey showed 49 percent of hedge fund clients citing fees as the most important issue for the industry over the next year. Fully 58 percent said they don't believe their interests are aligned with their managers', though 58 percent said they've seen conditions "shift in their favor."

"The hedge fund market is increasingly crowded, and many smaller or newer managers are seeking to make their lower fees a way to differentiate themselves from their competitors." Amy Bensted, head of hedge fund products at Preqin, said in a statement.

"It is true that the largest, oldest and best-performing hedge funds are still able to command higher fees, but if investors are prepared to commit to a lesser-known fund, they may find many opportunities that offer them a significantly lower fee rate," Bensted added.

There are 8,406 total hedge funds and another 1,601 funds of funds, down marginally from 8,474 and 1,657, respectively, at the end of 2015, according to data tracker HFR. The levels of both launches and liquidations are on the decline this year, with 406 new firms opening and 530 closing. Total assets of $2.898 trillion are little changed this year.

Performance has been underwhelming, with the HFRI Fund Weighted Composite Index up 3.5 percent through August, compared to a 7.8 percent total return (including dividends) for the .