The average fee for an active global equity mandate has fallen by 11% since 2017 following increased competition and pressure from cheap index-tracking products.
31 JULY 2019 | CHRIS SEEKINGS
That is according to a report from actuarial consultants Lane Clark & Peacock (LCP), which said that active global equity fees have decreased by £40,000 for a £50m investment.
There have also been fee reductions for multi-asset diversified growth funds, multi-asset credit, liability driven investment strategies and passive global equity mandates.
And the researchers estimate that a typical £500m defined benefit pension scheme in the UK has seen total investment manager fees fall from 0.39% to 0.36% per annum.
"Falling investment manager fees allow investors the opportunity to renegotiate their fees to the new market level," LCP partner, Matt Gibson, commented.
"It is important to remember that reduced costs do not always result in value for money - fees and costs should be considered against the value the investment manager creates."
LCP said that their research is the first time that an accurate and comparable analysis of transaction cost data has been undertaken since regulation changed in 2017.
Despite fees falling across many asset classes, the researchers found that corporate bond fees have increased by £35,000 for a £50m mandate size.
They also found that transaction costs add 25% to the headline annual management fee for a £50m investment in an average active global equity pooled fund.
The research involved a survey of 71 asset management organisations, covering 49 asset classes and 677 different products. The survey has been conducted since 2010
LCP said that the findings can be used to benchmark existing manager fee arrangements, compare fees for new investment managers, and to negotiate fee levels.
"A change in regulation at the end of 2017 allows for accurate and comparable analysis of transaction cost data for the first time in the history of the survey," Gibson said.
"We find that transactions costs vary widely in some asset classes and can be a significant part of the total cost of investing."