How much institutional investors pay in asset management fees continues to be a hot topic, but hard data about the difference between what asset managers say they charge and actual fees charged has been hard to come by.
A new report form eVestment provides a comprehensive overview of fee structures across the traditional strategy landscape globally and compares stated fees from thousands of asset managers reporting to eVestment covering more than 8,000 separate accounts with actual negotiated fees charged on mandates awarded sourced from eVestment Market Lens.
As expected, quoted fees went down as the size of the mandate increased, but there was wide variety in the difference between quoted fees and actual fees across the strategies and mandate sizes reviewed.
According to the report, among the broad universes covered in the report, large discounts were found in US Small Cap Growth mandates of more than USD250 million (30 basis points) and All US Small Cap Equity mandates (24 basis points).
The largest difference between quoted fees and negotiated fees was to be found in US Small Cap Value mandates of more than USD250 million, with a difference between stated fees and negotiated fees of 34 basis points. Though the Market Lens sample size for this group was small, the difference is notable and similar to differences within other small cap segments.
The smallest discount among the universes covered in the report were in All US Mid Cap Equity mandates of less than USD100 million, at seven basis points.
All US Large Cap Equity mandates of USD101 million to USD250 million, US Small Cap Value mandates of less than USD100 million and All US Small-Mid Cap Equity mandates of USD101 million to USD250 million also had discounts on the smaller side at 9 basis points each.
“This information is valuable for the industry because it helps fill a key information gap in the process of vetting asset managers and awarding mandates,” says eVestment Head of Global Insights John Molesphini. “For asset managers, this information highlights how much they could consider discounting fees to help win a mandate, without discounting too much. And for investors, this information can help them understand what reasonable fee discounts look like. Investors with unrealistic expectations of the discounts they might be able to negotiate might pass on a really great manager in favour of a weaker manager who is offering a larger discount that is outside of the norm.”