The fees that some pension schemes are paying asset managers have climbed by 70% in the past six years, according to Lane, Clark and Peacock (LCP).
Managers with an active global equity mandate who match the return of the global equity index could be charging trustees £637,000, which is £262,000 more than they did in 2011, the firm discovered after speaking to 77 asset managers.
So the rewards for active management in this area are growing, despite producing passive results. This comes during a period where average fees in 60% of asset classes have fallen.
LCP partner and head of investment research Matt Gibson said some managers have benefited from asset under management increases in recent years, thanks to rises in equities and bonds.
“Whilst we welcome the reduction in fee rates in many asset classes, overall, investment managers are charging much more but don’t seem to be doing more,” he added.
“Our findings highlight just how important it is for pension schemes to regularly monitor their investment managers and put negotiating pressure on them to reduce fees.”
The survey examined the costs charged on £50m investments in various asset classes. Those investing in property commanded the highest fees at £590,000, while passive UK equity sat at the foot of the table on £38,000.
LCP also discovered that defined contribution (DC) schemes using a platform to invest £10m in a passive global equity fund could pay £5,500 less in fees than if they invest in a fund directly.
The firm’s sixth annual investment management fee survey also highlighted a lack of consistency over transaction costs. Those managing the survey claimed that some asset managers only provide broker fees and stamp duty.
Gibson is concerned at the hidden costs in the asset management industry and so welcomes the guidelines in this area that could be introduced by the Financial Conduct Authority (FCA).
