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Asset management fees stable since 2004 – Mercer

GLOBAL - Institutional asset management fees have remained stable since 2004, according to Mercer Investment Consulting.
 
"Despite the competitive nature of the market, fee levels for the traditional asset classes have remained stable since 2004," the consulting firm said in a study of management fees.

It added that the highest fees are charged for more complex asset classes such as small-cap and emerging market equities, adding they are "also richer sources of alpha".

Equity fees vary significantly between regions, with Asia having the highest and Canada the lowest.

Mercer's study covered 164 traditional and alternative institutional investment strategies.

It found that emerging markets equities is the most expensive regional asset class, with median fees for a $100m segregated mandate at 0.88% or 88 basis points (83 bps for a $250m fund).

Traditional active fixed income fees were lower at around 25bps. Index-based fixed income strategies are between 15 bps and 30 bps cheaper than active fixed income strategies, depending on account size.

"Given that we are in an environment of lower expected returns, albeit one with a ‘dash for alpha', we believe investment managers will find it hard to justify above-average fees unless they have demonstrable competitive advantages which they articulate clearly," said Divyesh Hindocha, worldwide partner and global director of consulting at Mercer Investment Consulting.

"A comprehensive review of performance should include cost analyses on an absolute basis and also relative to asset class peers. The data from our study provides the basis for such an informed analysis."

Elsewhere, Watson Wyatt said the contributions the UK's largest companies are making to defined contribution pensions schemes have increased by over 10% in the last two years.

It said the average pension contribution from FTSE 100 employers to defined contribution (DC) schemes has increased to 9.4% of salary, from 8.5% earlier.

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