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Alternative Market Briefing

Lower manager fees cut cost burden on institutional investors

Tuesday, November 23, 2021

Laxman Pai, Opalesque Asia:

Thanks primarily to lower external money management fees, the institutional investors' expenses have gone down, said a study.

87% of expenses went toward external investment management fees, down 6 percentage points from 2015 (93%), according to a survey from investment consultant Callan.

The company's 2021 Cost of Doing Business Survey says that among the pension fund, endowment, and foundations surveyed between November 2020 and June 2021, 44% of respondents plan to review and/or renegotiate fees over the next one to two years as their biggest change, whether it is custody fees (27%) or investment management fees (17%).

54 basis points was the average total of all expenses paid by institutional investors, a 5% decrease since 2015 and the first decline in the survey's history, said the survey, which reveals trends on 2020 expenses for 163 organizations with more than $975 billion in assets.

The Highway and Transportation Funding Act of 2014 had the greatest impact on expenses, representing a 30% higher score than the next highest-cited regulation (rules regarding the ongoing coronavirus pandemic).

81% of respondents utilized global custody services for U.S. assets and sub-custody of non-U.S. assets.

"Average total fund expenses for asset owners in aggregate went down for the first time in the survey's history," said Ivan "Butch" Cliff, executive vice president and director of research. "This is not surprising ......................

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