A large number of investors are unhappy with aspects of asset management costs, even though fees have been declining, research indicates.
Overall, 34% of investors in a survey said there had been an increase in fund servicing costs in the past three years, with ESG costs being a “pressure point”.
Bfinance, which carried out the research, said investors across the globe were “grappling” with cost management challenges due to inflation, heightened ESG requirements and regulation.
Nearly half (46%) said like-for-like asset management fees have declined, but a quarter of them said they had experienced an increase in ad-hoc expenses from asset managers, according to consultancy bfinance, which surveyed 197 investors in 22 countries.
Nearly half were dissatisfied with the level of comparability of asset managers’ performance fees, market impact costs and ad-hoc expenses.
The firm’s research, called The Investors’ Costs and Fees report, covers pension funds, insurers, and endowments.
Although 83% of investors said they were satisfied with the transparency of management fees, there were widespread challenges to do with non-transparency and non-comparability across many cost components and asset classes, said bfinance.
Duncan Higgs, head of portfolio solutions at bfinance, said: “Although we’ve seen some investors making major strides on the subject of cost management, this report really illustrates how far the investment industry still has to go before it reaches high standards of cost transparency and cost comparability in the eyes of asset owners.
“This subject will likely come under greater scrutiny now that costs in many areas are rising – particularly in fees for fund servicing – custody, audit, legal – and various ad-hoc charges passed on by asset managers to their clients outside of the management fees. We still see real scope for investors to improve value for money, without compromising on strategic goals, in areas such as transaction cost analysis.”
Kathryn Saklatvala, head of investment content at bfinance and report co-author, said the findings were in “real contrast versus the previous decade, when low-interest rates, downward pressure on management fees and improved (though still imperfect!) transparency helped considerably to reduce like-for-like costs for investors”.
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