Three experienced superannuation and funds management industry professionals have joined forces to bring a new fee-benchmarking service to the Australian market.
The group has formed Jefferson & Shea Analytics — a part of boutique consulting firm Jefferson & Shea Group — with the goal of providing institutional investors with greater insights into investment management fees across a wide variety of strategies, mandates and funds.
It is made up of the former head of BNP Paribas Securities Services in Australia and New Zealand, David Braga; former managing director and Australian head of research at Parametric Portfolio Associates, Raewyn Williams; and former Christian Super CEO Peter Murphy.
While noting that superannuation funds had successfully reduced the fees they pay to external managers in recent years, the group said that more transparency was needed.
“It’s like when you’re on a plane — everyone paid something different to get the same service. You’d really like to know you’re not overpaying, especially if the person next to you is a competitor,” Mr Braga explained.
“At the moment, it’s really hard to be sure you’re getting a good deal from your investment manager and benefiting from the scale you have.”
Jefferson & Shea Analytics has based its fee-benchmarking services on an approach launched in the UK by analytics firm ClearGlass, which revealed that many institutional investors were struggling to keep up with trends in fees for specialised mandates.
Since its launch in 2019, ClearGlass has grown to include more than 800 pension funds and 450 managers who either access or provide information to the service.
“ClearGlass has uncovered large dispersion in the actual — not published — fees charged by managers across the broad range of listed and private market asset strategies it covers, with clients able to negotiate fee reductions of eight basis points overall last year. And the reductions can be significantly larger for certain clients and asset classes,” said Ms Williams.
Mr Braga said that, in his conversations with super funds in Australia regarding fee discipline, he had also identified a need for internal teams to independently determine that they are getting value-for-money investment fee outcomes from their own investment staff.
“Many funds have strong partnerships with their fund managers and the loyalty this brings is commendable; however, there’s still a need to validate the cost/performance outcome. There’s so much reliance on an intuitive sense or just a confident assertion like ‘yes, we’re getting a good price from this manager’,” he said.
“As an industry, we need to get beyond these assertions and move to independent and deep data-based analyses. Data is valuable and drives so much of how we invest; why should we resist using data when it comes to investment fees?”
J&S Analytics indicated that it intends to initially partner with a small group of funds in Australia to showcase the ClearGlass benchmark reporting.
“ClearGlass fee benchmarking is a networked offering — it gets stronger and stronger the more funds that use it,” Mr Braga and Ms Williams said.
“Like the UK, our industry is very connected, so we believe it will only take a few funds here to start benefiting before it gains its own momentum.”
