Global investors copping asset costs, charges

Yasmine Raso

Senior Journalist, Financial Newswire

4 July 2023

bfinance’s latest Investors’ Costs and Fees Report found while global investors are no longer subject to sky-high management fees, a lack of cost transparency and comparability among asset managers remains.

The survey of close to 200 asset owners in 22 countries revealed that ongoing inflationary pressures, increased environmental, social and governance (ESG) requirements and heightened regulatory standards has led asset managers to pass on several “ad-hoc” charges for fund servicing and other fees onto clients.

The poll results showed many investors are left disappointed, with only 27 per cent satisfied with the transparency of market impact costs and 14 per cent satisfied with the comparability. The satisfaction rates differed across asset classes and other cost components, with 83 per cent of respondents satisfied with the transparency of management fees and only 63 per cent satisfied with the comparability.

“Although we’ve seen some investors making major strides on the subject of cost management, this report really illustrates how far the investment industry still has to go before it reaches high standards of ‘cost transparency’ and ‘cost comparability’ in the eyes of asset owners,” Duncan Higgs, Managing Director and Head of Portfolio Solutions at bfinance, said.

“This subject will likely come under greater scrutiny now that costs in many areas are rising – particularly in fees for fund servicing (custody, audit, legal) and various ‘ad hoc’ charges passed on by asset managers to their clients outside of the management fees.

“We still see real scope for investors to improve value for money, without compromising on strategic goals, in areas such as transaction cost analysis.”

Just under 25 per cent of poll respondents said they have faced a rise in ad-hoc charges, with ESG-related fees and costs noted as a key “pressure point” that has disrupted investors’ experience of “low interest rates, downward pressure on asset management fees, and improved cost transparency facilitated by regulation and industry initiatives”.

Fixed income investors were the most satisfied with the transparency and comparability of related costs, while 44 per cent of private markets investors and 27 per cent of liquid alternatives investors are dissatisfied with the current levels of transparency and comparability.

“The data and anecdotal comments throughout this report really illustrate the extent to which investors are now facing cost-additive pressures,” Kathryn Saklatvala, Head of Investment Content at bfinance and report co-author, said.

“This is a real contrast versus the previous decade, when low interest rates, downward pressure on management fees and improved (though still imperfect!) transparency helped considerably to reduce like-for-like costs for investors.”