Asset management fees for most non-traditional asset classes have fallen following increased scrutiny from cost-conscious investors, according to a report by Mercer.
The 2010 Asset Manager Fee Survey found fees for hedge funds, private equity, infrastructure and real estate had all decreased, while fees for traditional asset classes had varied, with some increases observed in long-only equity and fixed income strategies.
Mercer global director of consulting Divyesh Hindocha said the survey provided evidence that the impact of the global financial crisis was continuing to be felt by companies and investors.
“Although not universal, subdued investment returns have taken the edge off many alternative asset products,” Hindocha said.
“Combined with an increased focus on operational costs, this trend has put growing pressure on asset managers to reduce the complexity of their products and lower their fees in the already pricey alternatives arena.”
He said Mercer believed there was still room for further simplification and larger reductions in the overall fees charged by asset managers.
Mercer Asia Pacific head of manager research Marianne Feeley agreed there was downward pressure on fees in alternative asset classes in Australia.
“This is even the case in some of the newer alternative areas, such as infrastructure debt, where clients are less willing to pay a private equity-like fee for a product that doesn’t have that private equity-like upside,” Feeley said.
“Our clients are also expecting hurdle rates on fees to align better with target returns, a phenomenon which has been apparent in real estate.”
She said that in traditional asset classes, Australian fixed income had the largest average increase in fees, although that was off a low base.
“Managers have performed well against global peers and are willing to drive a harder bargain,” she said.
The Mercer survey is a biannual report analysing fee data on more than 20,000 asset management products from more than 4000 investment management firms.
