UK – Despite higher fees, the UK asset management industry may offer better value for money now than in the past, according to research by Mercer Investment Consulting.
Analysis carried out by the consultants shows UK institutional asset management fees to have risen since 1999. Global equities and UK equities fees have increased the most, by up to 0.14% of assets under management. Core UK equities, regional equities and fixed interest fees have increased by up to 0.02%.
However, some discretionary balanced management fees have actually fallen over the period, indicating that the rise in fees is linked to the trend towards specialist mandates. Julia Hobart, worldwide partner at Mercer, believes the rise in fees to be expected.
“While fees have generally risen, mandates have become more clearly defined, and clients are more specific about what they require of their managers. Overall, the industry has become more rational,” says Hobart.
The rise in fee levels should also be put into perspective, Hobart believes. “Choosing a manager that performs well is key, For example, just 0.5% outperformance on a 75 million pound mandate would generate 375,000 pounds which would usually wipe out the whole fee.”
According to Mercer, investors have become more aware of their needs, and therefore what to expect from managers. The falling markets have focused attention on performance, and investors are only prepared to pay for results, and outperformance can outweigh the impact of higher fees.
Says Hobart: “On balance, the asset management industry may actually offer better value for money now than four years ago.”