Headline fee rates continue to fall across most core asset classes, although overall costs are often rising due to higher additional expenses, according to consultancy LCP’s latest investment management fees survey.
The survey covers 53 asset classes and data from over 50 institutional investment managers worldwide, capturing the rates they offer investors through funds and segregated accounts.
According to LCP, the survey indicates that in many asset classes, median Ongoing Charges Figures (OCFs) have risen even as median Annual Management Charges (AMCs) fall.
This reflects higher additional expenses, LCP said. Matt Gibson, head of investment research at the consultancy, told IPE those expenses could reflect custodian and administrator fees, with a higher regulatory burden potentially a reason behind their rise.
LCP noted that active global corporate bonds and global passive equity are notable exceptions to the general decline in headline rates as they saw increases.
The consultancy used an illustrative £50m (€58m) mandate size to show the impact of fee rate developments in real-money terms since 2022, with findings including:
- the median AMC for the global active equity asset class has fallen by 0.07%, or £35k, but the OCF has increased by 0.01%, or £5k;
- similarly, for active ESG equities, the median AMC has fallen by 0.02% or £10k, whilst the OCF has increased by 0.08% or £42k; and
- for global passive equities, the median AMC has increased by 0.07% or £33k.
LCP said the survey also showed that from the point of view of the investment management industry, there has been a fall in fee revenue from UK defined benefit pension funds of around 40% since 2017 as assets in DB schemes have fallen from £1.5trn to £1.1trn.
It said that for a £500m pension scheme, the aggregate fee rate being paid has fallen steadily from 0.41% in 2017 to 0.34% in 2025, equivalent to a saving of £350k per annum, all else being equal.
Changing asset allocations and changes to fee rates across the underlying asset classes are behind the drop, LCP said, with the biggest impact from a reduction in equity allocations and a subsequent increase in allocation to cheaper liability-driven investment (LDI) and bond mandates.
The survey also showed that while active equity fees continue to fall, active corporate bond fees are rising.
LCP also said zero-fee index tracking funds look very appealing, but on closer analysis, there was often a tax drag that, in some cases, could be bigger than any fees saved.
In LDI pooled funds, meanwhile, headline average fee rates are down, LCP said, but after adjusting for the leverage change before and the 2022 mini-budget – which caused a Gilts sell-off and LDI crisis – to maintain the same level of exposure, the annual fee has risen by about 0.03%.
“Headline fee reductions can look positive, but they don’t tell the full story, and for many asset classes, overall fees and costs can be both complex and opaque,” said Gibson.
“Our survey shows that overall costs in pooled funds are often rising, driven by additional expenses and new charging structures. Investors need to dig deeper than the headline management fee and focus on total costs to ensure they’re getting genuine value for money.”
