The Watson Wyatt note on fees also described the skewed nature of fees whereby a base is augmented by a performance fee, because managers do not repay the base if they underperform. The consultants say that performance fees should not be calculated on an annual basis but rather on a rolling three-year basis or longer.

The fee debate, of course, is not confined to long/short equity funds, let alone 130:30 funds. But it does provide another example of where super funds need to more closely scrutinise the offering from managers and, in particular, question the definition of skill implied in their fee structures.

The best-case scenario for adding limited-shorting funds to a super fund’s portfolio is that they will provide a cost-effective lift to the overall alpha generated. At worst, this lesson may be a little more expensive than other equities strategies.

We’ll give the last word to Tribeca’s Sean Fenton: “If a super fund doesn’t include shorting strategies in its portfolio, it might as well go indexed.”