Asset managers are discounting the fees they charge big investors by up to a third in a bid to gather assets at a time when regulation and competition among fund houses are making it harder to win and retain business.
Jeff Levi, a partner at Casey Quirk, says asset managers are “hungry for assets” but an oversupply of managers competing for the same assets, large redemptions from sovereign wealth funds and negative growth in the institutional space is forcing fund houses to discount the fees they charge new and existing clients. “Fee pressure is here to stay and will continue to increase pretty fast,” he adds.
The Casey Quirk study, which asked 60 asset managers across Europe and North America about their fee models, found new clients investing for the first time with a fund house will be offered discounts of 22 per cent in Europe and 16 per cent in the US.
The biggest discounts were offered to institutions that backed new products. Asset managers are tempting investors to new products by marking fees down 37 per cent in Europe or 22 per cent in the US.
Piers Bertlin, principal at Mercer, the investment consultancy, says: “One of the joys of fund management is that incremental new revenue flows straight to the bottom line, so winning new assets makes commercial sense even on discounted rates, provided it does not compromise fee rates for existing business or affect the fund manager’s ability to outperform.”
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