Hedge fund investors want a deal on fees. Managers don't start negotiating until the check hits $120 million.

• The hedge fund's industry notoriously high fees have been pushed down as managers have been more willing to negotiate. But talks only start with the guarantee of a big check, according to data from eVestment.
• To lower management fees, a $119 million check was required on average. To cut performance fees, the cost was even higher - $133 million.
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Everyone has a price. For hedge funds, that number includes a lot of zeros.

Investors in the $3.3 trillion hedge fund industry have been adamant about pushing down fees, especially as performance has struggled to match the overall market and large-scale investors like pensions and endowments face pressure to lower costs.

And hedge funds have mostly come down from the once-ubiquitous 2% management fee and 20% performance fee structure, with averages now roughly 1.4% and 16%, according to Hedge Fund Research.

But these cuts are often tied to a big commitment, according to data from a new study from research firm eVestment. Managers require, on average, a $119 million investment to cut management fees. The price goes up to $133 million for performance fee reductions. That's roughly double the average investment in hedge funds, according to eVestment.

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"To start really negotiating, you need to be writing checks north of $100 million," said Kris Kwait, co-CIO of Commonfund, a $25 billion manager for endowments, pensions, and foundations.

Commonfund has pushed the hedge funds in their portfolio to adopt a fee structure that pays no management fees, but high performance fees because "it's really all about how much alpha they can deliver."

"Our most expensive managers are our favorites because they generate the most alpha," Kwait said.

There is still room in the industry for smaller investors looking for a deal - they'll just have to take a risk to get it.

For instance, family offices are often big backers of emerging managers that don't yet have a track record for pensions or endowments to invest in, and can push for a discount, said John Culbertson, the chief investment officer for Context Capital Partners, which invests in hedge funds on the behalf of family offices.

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Culbertson believes investors get too hung up on the front-facing fees, and don't look at the whole picture. For example, pensions have told him that they can't invest in certain well-known funds because of their fees, despite their long track records of outperforming the market without any correlation to the stock market.

"The industry is, at times, overly focused on gross fees that they pay versus the net returns that they receive," he said.

"There's a bit of an obsession around fees."

But some investors are constrained by fiduciary concerns or political pressures. Wilmington Trust, which runs more than $90 billion and invests in hedge funds, has an "intense focus on keeping fees low" because of the firm's fiduciary duty to investors, said Matt Glaser, the firm's head of equity, alternative investments and manager research.

Fortunately, for an investor as large and old as Wilmington Trust, managers are willing to make it work.

"We have access advantages because of our size and our brand," he said.

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