Broker commissions, entry fees and other transaction costs make up nearly one-quarter of the total investment charges borne by the worlds largest institutional investors.
That is according to analysis of 19 pension and sovereign wealth funds with total assets of over £2trn, which found that transaction charges are nearly half as costly as investment management fees.
It was also found that average transaction costs are just as high as the performance fees paid out by institutional investors, although these vary significantly from fund to fund.
The research is intended to shed light on the "hidden" costs incurred in trading securities before returns are calculated, and is one of the most detailed studies of its kind.
"While transaction costs are clearly material, there is a range," said John Simmonds, UK principal at CEM Benchmarking, which carried out the analysis.
"Where you sit in that range is dependent on asset mix, volumes of trades, estimates of spreads or simply if you are paying more or less than others for similar activities."
The transaction costs identified include broker commissions, taxes, broker research, fixed-income and over-the-counter derivatives spreads, entry or exit fees, hedge fund fees and transaction costs for private investments.
It was found that these account for 24% of total investment costs, with management fees making up 49% and performance fees 24%, while governance and overlays are responsible for the rest.
CEM Benchmarking said the total average costs for the investors studied were 86.3 basis points (Bps), with transaction costs at 20.2 Bps, performance fees at 20.4 Bps, and management fees at 41.8 Bps.
This comes after the UK's Financial Conduct Authority set up a working group to support consistent and standardised disclosure of costs using reporting templates, with similar initiatives taking place in Australia and the Netherlands.
"There has been a real drive towards transparency in investment costs around the world," Simmonds continued. "Obtaining the data is the first and hardest part.
"What comes next is a comparison with others on a sensible basis to determine if those costs are reasonable."