Study: Insights Into Negotiated Institutional Manager Fees

29 Apr

Study: Insights Into Negotiated Institutional Manager Fees

How much institutional investors pay in asset management fees continues to be a hot topic, but hard data about the difference between what asset managers say they charge and actual fees charged has been difficult to come by. eVestment’s new report, The State of Institutional Separate Accounts Fees, aims to help.

The new report provides a comprehensive overview of fee structures across the traditional strategy landscape globally and compares stated fees from thousands of asset managers reporting to eVestment covering more than 8,000 separate accounts with actual negotiated fees charged on mandates awarded sourced from eVestment Market Lens.

As expected, quoted fees went down as the size of the mandate increased, but there was wide variety in the difference between quoted fees and actual fees across the strategies and mandate sizes reviewed.

Some key findings from the report include:

  • Among the broad universes covered in the report, large discounts were found in US Small Cap Growth mandates of more than $250 million (30 basis points) and All US Small Cap Equity mandates (24 basis points).
  • The largest difference between quoted fees and negotiated fees was to be found in US Small Cap Value mandates of more than $250 million, with a difference between stated fees and negotiated fees of 34 basis points. Though the Market Lens sample size for this group was small, the difference is notable and similar to differences within other small cap segments.
  • The smallest discount among the universes covered in the report were in All US Mid Cap Equity mandates of less than $100 million, at 7 basis points.
  • All US Large Cap Equity mandates of $101 million to $250 million, US Small Cap Value mandates of less than $100 million and All US Small-Mid Cap Equity mandates of $101 million to $250 million also had discounts on the smaller side at 9 basis points each.

Why Fee Information is Valuable

This information is valuable for the industry because it helps fill a key information gap in the process of vetting asset managers and awarding mandates.

For asset managers, this information highlights how much they could consider discounting fees to help win a mandate, without discounting too much.

For investors, this information can help them understand what reasonable fee discounts look like in the current market.