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Investment Management Fees and the Impact of Competition, Transparency, Compression, and Regulation

  • Posted by: ,  Chief Executive
  • 08 August 2018
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Fund Management Costs in 2018

It has been a long time since we've covered the topic of investment management fees - over a year, in fact.  In the meantime, institutional asset managers have been beset with increased regulatory scrutiny, calls for further transparency from asset owners and fiduciaries, and fierce competition from ETFs and index providers.

Our first report from bfinance highlights asset managers who have responded to competitive pressures by focusing on premium products, such as unconstrained or multi-asset funds. Other papers each paint a portion of the broader landscape of global fund management fees.

investment management fees

Global Investment Management Fees: New Savings, New Challenges (bfinance, 2017)
Despite falling fees in several sectors, many asset managers have opted to launch fashionable products at a premium to their conventional equivalents, including unconstrained, multi-asset or advisory mandates.

Morningstar Global Fund Investor Experience Study 2017
This Morningstar report measures the experiences of mutual fund investors in 25 countries and across four categories—Disclosure, Regulation and Taxation, Sales, and Fees and Expenses.

2017 U.S. Investment Management Fee Survey (Callan)
This survey by Callan covers current trends in investment management fees and payment practices. Respondents included a wide sample of investment organizations and US-based asset owners. 

UK Pension Fund Investment Fees and Costs (Northern Trust and Aon, 2018)
Investment costs and charges are an important issue for trustees and pension fund executives that are faced with both explicit and implicit costs for the management of their investments. 

Trends in the Expenses and Fees of U.S. Funds (ICI, 2018)
This paper by the Investment Company Institute details trends in the expenses and fees of investment funds. Over the past two decades, the expense ratios on long-term mutual funds have fallen significantly.

How Much Do Fees Affect the Active Versus Passive Debate? (S&P Dow Jones Indices, 2017)
Using both gross and net-of-fees returns, this report explores the impact of fees on the performance of mutual funds and separately managed accounts consisting of equity and fixed income.

Cheaper is Not Better: On the Superior Performance of High-Fee Mutual Funds (2017)
This academic paper looks at expense ratios and the performance (net-of-fees) of actively managed mutual funds. After adjusting for profitability and investment factors, the authors conclude that cheaper funds are not in fact better.

2017 Fiduciary Management Fees Survey (EY)
EY presents their Fiduciary Management Fees Survey, including insights into the larger range of fiduciary management fees, the range of investment management fees, and the relationship between fiduciary management fees and total costs.

Morningstar U.S. Fund Fee Survey (April 2018)
The average asset-weighted expense ratio for U.S. open-end mutual funds and ETFs declined by 8% from 2016 to 2017, the largest one year decline in the 21st century.  Morningstar looks at further implications of falling expense ratios. 

2018 Hedge Fund Institutional Investor Survey (JP Morgan)
Over 250 institutional investors across the globe participated in this survey on the hedge fund industry, helping to gauge both industry trends and investment behaviour.

Investment Offerings and Pricing in a Post-MiFID II World (Deloitte, 2018)
Deloitte discusses the ways in which MiFID II has impacted the private banking market and challenged existing business models. Many private banking firms have introduced both new pricing and new offerings as a result.

2018 US Defined Contribution Trends Survey (Callan)
Conducted in late 2017, this survey details responses from 152 plan sponsors on key themes and trends within the US defined contribution industry. 

Understanding the Cost of Investment Management: A Guide for Fiduciaries
This Commonfund paper reports on disclosed vs undisclosed costs in an effort to provide fiduciaries with a better understanding of the total costs paid for the funds that they have invested.

Transparency of Performance, Costs, and Fees (EIOPA, Nov 2017)
The EIOPA Occupational Pensions Stakeholder Group presents a position paper on the transparency of performance, costs, and fees of pension products as a continuation of an EC initiative.

Japan - GPIF's New Performance-Based Fee Structure (2018)
The Japanese Government Pension Investment Fund (GPIF) describes a new performance-based fee structure for their managers in order to incentivise excess returns.

Superannuation Fund Performance and Fund Fees (2016)
Sydney-based academics look at superannuation funds, finding that the most expensive funds produce higher after-fee returns than the cheapest funds.  As a result, investors holding more expensive funds are not worse off. 

Australian Fund Management Fees: Ideas for institutional investors (Frontier Advisors)
Frontier Advisors not only discusses challenging issues related to investment fees, but proposes strategies for institutional investors to maximise value. 

Does it pay to pay performance fees? Empirical evidence from Dutch pension funds (De Nederlandsche Bank, 2017)
How do performance fees affect returns? The authors look at over 200 Dutch pension funds for a 3 year period, finding no statistically significant evidence that performance fees have either a positive or a negative effect.

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