Institutional investors, in some cases, have seen a rise in the fees they pay for investment funds, which is thought to be due to inflationary pressures on asset managers, research shows.
Fitz Partners, a fund fees specialist, found that institutional share classes in a sample of funds had the largest proportionate increase in equity fund fees.
However, the research – which looked at the ‘ongoing charges figure (OCF) of funds – continued their generally downward trend.
Hugues Gillibert, Fitz Partners CEO, said: “While fees are still going down overall, it is interesting to note that our research shows institutional share classes, which would be the most competitive when it comes to pricing, having the largest proportionate increase in equity funds OCFs at 9%.”
Fitz Partners found that 17% of share classes in the Fitz Database of around 40,000 share classes showed a change in the OCF over a recent 12-month period. This ranges across retail, ‘unbundled’ and institutional share classes.
Out of all share classes showing a material change, it was found that 35% of funds experienced an OCF increase. The two largest asset classes with changes in OCFs were equity and bond funds.
Some 30% of both equity and bond fund share classes, with a change in fees, showed an increase.
Retail share classes across the bond and equity asset classes were shown to be more volatile than unbundled (or “clean”) and institutional share classes.
Retail share classes for bond funds showed a wider average change, between a -12 basis points (bps) drop and a 7bps rise in their OCFs, whilst the other share class types showed changes between -8bps and +6bps.
Across all equity funds, retail share class changes in OCFs were +8bps and -10bps.
Gillibert said the increase in institutional OCFs could highlight the inflationary pressures on asset managers and service providers, “thus forcing them to pass these costs onto the investors” through higher fund fees, which pushes up OCF levels.
Nevertheless, “strikingly”, fees for any share class types across equity or bond funds still show higher reductions than increases, “which would be a relief for investors”.
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