Fund investment advisory fees increase 17%

by | Aug 30, 2017

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Fund investment advisory fees increase 17%

A new report from Fitz Partners reveals that the average investment advisory fees increased by 17% from 35bps to 41bps over the last three years.

During the same time, average gross management fees (including distribution fees) moved down by 4% from 1.06% to 1.02%.

The figures come from the firm’s latest edition of its ‘Investment Advisory Fee Benchmarking Report’.

 

The report highlights the fact that the share of management fee paid for investment advisory increased by 22% over three years and when considering equity funds, the increase is 20%. Remaining revenue or margin received by fund houses from management fees after any investment advisory and distribution fees has in effect shrunk, it concludes.

Fitz Partners Chief Executive Officer Hugues Gillibert said: “We are seeing a further increase in one of the components of fund fees impacting funds profitability. Internal discussions in fund houses are becoming more focused. Fee benchmarking is not only a question of overall level of funds costs for investors, it is also about good business practice and margin preservation.

“Whether it is for Transfer Pricing purposes when advisory services are delivered outside the funds’ domicile or for benchmarking sub-advisors fees or internal advisory teams’ costs for profitability purposes, a close monitoring of these bundled fees has become essential.

 

“When looking at trends in investment advisory fees and management fees for UK and European cross-border funds, we can see clearly that both charges are not moving in the same direction. Over the last three years, management fees overall have gone down slightly while investment advisory fees have increased substantially.”

Gillibert added: “As asset managers are watching their margins ever more closely, it has become essential to benchmark all components of funds management fees. It is remarkable to see that for many European asset managers, the part of management fees paid for investment advisory services has increased substantially and has been eating into asset managers’ margins.”

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