The actual fees paid versus the stated management fees of products is a topic of interest for both investors and asset managers. Taking a subset of data from our newly released State of Institutional Fees Report, we examine what fees look like across select Global and Multi-Region equity strategies, with this first of a two-part series focusing on the stated, or marketed, separate account fees.
Average stated management fees for separate accounts on the first dollar invested vary across region, cap, and style focuses. Differences are expected, however there are some common themes as well. For instance, Core styles are the least expensive option among actively managed strategies within intra-regional groupings (e.g. Global, ACWI ex-US, EAFE, and EM Core strategies charge less in management fees on the first dollar invested than their Growth and Value peers, across All Cap, Large Cap, and Small Cap subsets).
Average Stated Management Fee on First Dollar Invested
|Universe||Core Equity||Growth Equity||Value Equity|
|Global All Cap||0.66%||0.73%||0.81%|
|Global Large Cap||0.62%||0.77%||0.71%|
|Global Small Cap||0.87%||0.92%||1.02%|
|ACWI ex-US All Cap||0.73%||0.77%||0.74%|
|ACWI ex-US Large Cap||0.69%||0.76%||0.71%|
|ACWI ex-US Small Cap||0.90%||0.98%||0.95%|
|EAFE All Cap||0.70%||0.77%||0.81%|
|EAFE Large Cap||0.64%||0.79%||0.67%|
|EAFE Small Cap||0.89%||0.94%||0.94%|
|Emerging Mkts All Cap||0.81%||0.87%||0.85%|
|Emerging Mkts Large Cap||0.77%||0.85%||0.82%|
|Emerging Mkts Small Cap||0.98%||1.05%||1.07%|
And even when comparing the stated management fees inter-regionally, we note similarities exist here as well. For instance, Global and EAFE Large Cap strategies report little differences in fee levels (e.g. Global Large Cap and EAFE Large Cap strategies have near-identical management fees for investment amounts over $10M, and at a $250M amount, they differ by just 1 basis point).
Average Stated Fees: Actively Managed Strategies By Total Investment Amount (USD MM)
But these similarities are easier to note when viewing aggregates. Differences stand out more so when we look at the distribution of individual marketed fees. For instance, there is far less variation in fees reported by ACWI ex-US strategies compared to their Global, EAFE and EM counterparts (e.g. the majority (58%) of ACWI ex-US Large Cap products charge between 0.65% and 0.75%, inclusive, in management fees at $50M, whereas only 42% of EAFE LC, 34% of Global LC, and 26% of EM LC charge within that range).
Distribution of Management Fees
The scatter plots below show the dispersion and concentration of stated separate account management fees at a $50M USD investment. Larger bubbles represent more strategies at a specific fee, while darker regions represent more significant overlap. We excluded management fees >1.50%.
Moving away from individual differences, we again note some commonalities when comparing products from an aggregated perspective. For instance, charging more for performance is a common practice on a Global basis, as nearly all Global & Multi-Region strategies in the top quartile by 3-year performance charged higher fees on a $50M investment versus their bottom quartile peers. And as another example of commonality, large firms tend to charge less, with products from these firms averaging lower management fees than their bottom quartile and mid-tier counterparts for each of the regional/cap strategy combos shown below besides EM Small Cap.
Management Fees By Product Characteristics
Average management fees at $50M
3 YR Return Quartiles (2017-2019)
|Universe||Bottom Quartile||In Between||Top Quartile|
|Global All Cap||0.70%||0.61%||0.69%|
|Global Large Cap||0.59%||0.61%||0.68%|
|Global Small Cap||0.84%||0.84%||0.95%|
|ACWI ex-US All Cap||0.67%||0.70%||0.72%|
|ACWI ex-US Large Cap||0.62%||0.68%||0.71%|
|ACWI ex-US Small Cap||0.91%||0.90%||0.93%|
|EAFE All Cap||0.68%||0.70%||0.76%|
|EAFE Large Cap||0.63%||0.59%||0.67%|
|EAFE Small Cap||0.88%||0.84%||0.96%|
|EM All Cap||0.78%||0.81%||0.86%|
|EM Large Cap||0.80%||0.77%||0.80%|
|EM Small Cap||1.03%||0.97%||1.08%|
YE 2019 Firm AUM Quartiles
|Universe||Smallest Quartile||In Between||Largest Quartile|
|Global All Cap||0.75%||0.66%||0.62%|
|Global Large Cap||0.61%||0.66%||0.59%|
|Global Small Cap||0.96%||0.86%||0.81%|
|ACWI ex-US All Cap||0.75%||0.69%||0.68%|
|ACWI ex-US Large Cap||0.69%||0.68%||0.65%|
|ACWI ex-US Small Cap||0.97%||0.92%||0.88%|
|EAFE All Cap||0.75%||0.70%||0.65%|
|EAFE Large Cap||0.62%||0.65%||0.59%|
|EAFE Small Cap||0.94%||0.88%||0.82%|
|EM All Cap||0.84%||0.83%||0.77%|
|EM Large Cap||0.77%||0.82%||0.73%|
|EM Small Cap||1.07%||1.01%||1.04%|
But then when looking on a product-by-product basis of what separate account management fees are marketed at, versus the fees actually paid by public plan investors, we note that in the end the similarities and differences come down to negotiations.
Next week in Part 2 of this series, we take a look at the actual negotiated fees between managers and public plans.
Download our newly released State of Institutional Fees report for a detailed breakout of the fees paid versus stated management fees and insights on:
- Fee differences by public plan asset size and commitment amount
- Weighted fees by commitment amounts across strategy groups
- How products’ stated commingled fund and institutional mutual fund fees also compare to what public plan investors are actually paying.
The full report takes a look at the management fees of both equity and fixed income products across the Americas, EMEA, and APAC, in addition to Global & Multi-Region. Complete details on the methodology data and charts contained in this article are also listed in the report.