New report outlines fees paid by institutional investors

CAMRADATA Analytical Services has calculated and published the average fees paid by institutional investors across a range of asset classes including equities and bonds.

According to the report, the average base, or initial, investment management fee for equities is 77.7 basis points (bps) with an average minimum investment of £4 million. Then, once a further £28.4 million has been invested, a fee of 61.9 bps applies. For fixed income, the average base fee is 45.7 bps for a minimum investment of £3.6 million, with a discount to 34.5 bps coming in when another £39.2 million has been invested. For a fund of hedge funds mandate, institutional investors can expect a base fee of 104.8 bps for a minimum investment of £0.8 million and a discount to 100 bps when another £6.9 million is invested.

The founder and managing director of CAMRADATA, Steve Butler, said: “Institutional investors need a global perspective in service of their imperative to deliver value. Pressure on costs remains intense and evaluating manager performance and reward has never been more critical.”

According to CAMRADATA’s figures, which are based on fee schedules from nearly 200 asset managers in the UK and Europe, the most expensive equity asset class is Chinese equities, with an average base fee of 89.3 bps. UK equities (FTSE All Share) have a base fee of 69.5 bps, while US equities (S&P 500) have a base fee of 77.2 bps. Within fixed income, the most expensive category is European fixed income, with a base fee of 63.9 bps, while UK fixed income has a base fee of 33.9 bps, and global fixed income has a 43.9 bps base fee.

The report also includes information on performance fees. It found that 36.6% of investment products overall have performance fees and the average fee charged is 70.4 bps when a performance fee is charged compared to 82.8 bps when no performance fee is charged. Performance fees are most common for fund of hedge funds, with 75.7% of products offering them, and least common for European equities, with only 15.4% of products using performance fees. One of the biggest differentials between fee levels when performance fees are used is for US equities, with 87 bps fee charged when there is no performance fee, compared to 51.3 bps when there is a performance fee.