Fees in Focus: Three Key Report Takeaways for Asset Owners

12 April 2022

This month Nasdaq eVestment released Institutional Management: Fees in Focus, a new report that offers a look at the current landscape of separate account fees and the differences between the actual fees paid by public plan investors and fund managers’ stated fees for those accounts.

The report includes data on the stated management fees of 1,139 separate account structures from within eVestment’s Analytics platform, and 88 cases of actual fees paid by public plans and their corresponding managers’ stated fee comparisons, using documents uploaded to eVestment Market Lens. Asset owners can use the report to benchmark what they can expect to pay based on the amount they are seeking to allocate.

Here are three key takeaways from the report for Asset Owners:

Discounts from stated fees are the norm, but vary widely depending on several factors

Most management fees paid by public plans sourced from Market Lens documents were lower than the manager-reported fee structures in eVestment Analytics. Factors such as commitment size, strategy geographic, and capitalization focus each play a role, while allocations smaller-than-minimum investment amount or negotiating the use of performance-based structures drastically alter actual fees paid.

Fee breakpoints and dispersion data offers insights

US Small Cap Value strategies had fee dispersion as wide as 0.25% to 1.50% for a $50 million commitment while EAFE Large Cap Growth SMAs were strongly concentrated around the 0.65% mark. Additionally, fee breaks for US focused strategies were more generous than their ex-US counterparts. Having insight into the dispersion (or concentration) of fees charged by managers can help an asset owner make an informed decision on a potential SMA commitment and inform any potential fee negotiations.

Better performance doesn’t always mean higher fees though larger (Firm AUM) is often less (expensive)

While there are some strategies where top quartile performers tended to charge higher fees, across all strategies analyzed there was no clear correlation between these factors. For example, EAFE Small Cap Growth, where bottom quartile performers state a median fee of 1.00%, top quartile performers market a median fee of 0.90%. In terms of firm size, the data showed the largest quartile firms’ median stated fees were almost always lower than those of the smallest quartile.

Download the full report for all the insights:

Related News Article
Asset Owners’ Private Markets Dilemma
Subscribe to the eVestment Newsfeed

Get the latest news and investment insights delivered weekly straight to your inbox.