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Alternative Market Briefing

As investors remain focused on fees a new study highlights effective strategies for allocators

Wednesday, October 09, 2019

Bailey McCann, Opalesque New York:

A new study shows that asset owners have been successful at bringing fees down in nearly every asset class. The study was completed by consulting firm bfinance and is based on fees being quoted by asset managers for real mandates.

According to the findings, fund of hedge fund fees are down 28%; absolute return fixed income fees are down 15%; emerging market debt fees are down 10%; emerging market equity fees are down 6%; and global active equity fees are down 4%. And while private market fee trends are obscured by complex structures, management fees have also fallen in certain sectors, including, US Direct Lending fees and European Open-End Real Estate.

Mal Hunt, Head of Portfolio Solutions at bfinance, tells Opalesque that allocators with bigger ticket sizes tend to get the best deals from managers on fees, but adds that overall downward pressure is making it easier for mid-tier and small allocators to get better terms. He adds that there is "a potential opportunity for investors who appointed managers several years ago to re-evaluate their spending."

Fee compression has been driven by the rise of cheaper competitors, increasing transparency on costs, and expansion of the manager universe, adding that price competition in asset management is relatively inefficient. For managers that want to keep their fees at a higher overall rate, there is more pressure than ever to show consistent outperformance. Data throughout the repor......................

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