Research into investment management charges finds that pension funds are paying more than ten years ago for asset management despite the level of scrutiny given to fees over that time.
Investors overall charges have risen, said bfinance, despite the fact that pressure on fees over the past ten years had succeeded in lowering prices.
Research found that:
- Global active equity fees were down 8% (24% for low volatility).
- Smart beta fees were down 25%.
- Fund of hedge fund fees were down 20% (30% in Europe).
- Private debt management fees were down over 30% due to recent pricing pressures.
Yet greater allocations to private markets and “new breeds of premium product” had fuelled overall cost increases, bfinance said.
The causes of this contradictory trend were variously “premium” strategies that promise higher yields; a larger portion of illiquid investments in portfolios; and unexpected pricing resilience in some asset classes – such as active global equity.
Active global equity fees were “surprisingly resilient, falling just 8% since 2010-2014 despite intense pressure from passive and smart beta products”.
In its paper (‘Investment Management Fees: New Savings, New Challenges’), the firm said investors should exploit latest fee trends to obtain best value for money.
However, David Vafai, CEO at bfinance, said it was important to remember that fees and costs were never the most important metrics.
“Although we point to sectors where significant fee reductions have taken place, and encourage investors to take advantage of them, we certainly do not seek to advocate cost reduction for its own sake.
“Value for money is the most important priority and we appreciate that more robust and diversified portfolios may deliver higher net performance despite greater expense.”
©2017 funds europe
