Super funds face a 50 per cent jump in investment fees amid revelations of flawed fee structures.
Superannuation funds are facing a 50 per cent hike in investment fees, according to the latest research from global consultant Watson Wyatt.
The consultant also found a number of inconsistencies in the way many of the fees are structured.
Fees now average 1.1 per cent compared with around 0.65 per cent in 2002.
"This is obviously a good deal for investment managers, but not necessarily for their investors," Watson Wyatt head of investment consulting Graeme Miller said.
He attributed the hike to investor focus on alpha, which increased their appetite for alternative assets.
"Investors have naturally assumed that they are paying these fees to reward manager skill, but in many cases they are wrong," he said.
The research also found many managers were charging fees for outperformance when they were simply riding the strength of the market. It also uncovered a number of problems in the way fees were charged.
Base fees were calculated as a percentage of funds under management (FUM) which only encouraged managers to grow their FUM.
Money sitting in cash still attracted a fee despite the fact that the money had not yet been invested.
Annual fees were uncapped if the manager performed, yet the downside period was limited to a base fee.
These approaches were also used by fund of funds and in many cases lacked transparency.
Watson Wyatt said it would like fee structures to be standardised and include a base fee to cover costs.
It said performance fees should be calculated over longer periods and have hurdles.
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