SINGAPORE, Nov. 29 /Xinhua-PRNewswire/ --
-- Despite the competitive nature of the market, fee levels for the
traditional asset classes have remained stable since 2004.
-- Highest fees are charged for the more complex asset classes such as
global smallcap equity and emerging market equity. These asset
classes are also richer sources of alpha.
-- Fees for equity strategies vary significantly between regions; Asia
has the highest fees while Canada has the lowest.
-- Small cap equity products are more expensive and the limited capacity
of these managers means fees decline less rapidly as placements grow.
Mercer Investment Consulting's latest global study of institutional
management fees comes at a time when many believe investors are in an
environment of lower expected investment returns. Investment management
fees can be a material drag on performance in such an environment.
According to Mercer's study, which covers 164 traditional and
alternative institutional investment strategies, fees are highest in classes
where asset managers have the most potential to outperform. Emerging
markets equity is the most expensive regional asset class, with median fees
for a $100m segregated mandate at 0.88% or 88 basis points (bps), decreasing
slightly to 83 bps for a $250 million fund.
In contrast, fees for traditional active fixed income are markedly
lower. Fees across the regions hover around 25 bps, with less paid for
government products and more for high-yield bonds and credit-driven
products. Index-based fixed income strategies are between 15 bps and 30 bps
cheaper than active fixed income strategies, depending on account size.
Fees have remained relatively stable since 2004 when Mercer last
published its study, with Asia ex Japan, Europe ex UK and global fixed
income becoming marginally cheaper to access, and Europe (inc UK), global
value, global growth, UK equity and US large cap becoming slightly more
expensive.
"Given that we are in an environment of lower expected returns, albeit
one with a 'dash for alpha', we believe investment managers will find it
hard to justify above-average fees unless they have demonstrable competitive
advantages which they articulate clearly," said Divyesh Hindocha, worldwide
partner and global director of consulting at Mercer Investment
Consulting. "A comprehensive review of performance should include cost
analyses on an absolute basis and also relative to asset class peers. The
data from our study provides the basis for such an informed analysis."
For large cap/ all cap equity products, Canada was by far the cheapest
at around 30 bps. Australia, New Zealand, US and UK averaged around 40 bps
to 50 bps, while Asia, Europe, Japan and global averaged 50 bps to 70 bps.
The most expensive was the emerging markets equity category at around 90 bps.
Small cap equity products are more expensive, with Canadian, global and
US small caps commanding a premium of 25 bps to 30 bps, compared to Europe,
Japan and the UK, where the premium ranged between 15 bps and 20 bps. The
limited capacity of small cap equity managers means that fees decline less
rapidly as placements grow.
About the study
Mercer's analysis is based on fees as they are listed on Mercer's Global
Investment Manager Database ( www.MercerGIMD.com ). Mercer collects data
from more than 2,800 firms in eight regions including the UK, Europe, US,
Canada, Asia, Japan, Australia and New Zealand. The study covers 164
mandates in traditional and alternative asset classes around the world, and
more than 15,000 strategies.
Copies of Mercer Investment Consulting's latest Global Investment
Management Fee Survey can be purchased at
www.merceric.com/GlobalFeeSurvey . The cost is US$2,000. The study is
intended for use as a reference when assessing investment management fees.
Investment performance plays an important role in selecting an appropriate
investment manager. Fund fiduciaries evaluate fees in an effort to find the
most cost efficient, outperforming investment managers. Investment managers
likewise engage in fee analysis to determine their standing relative to
competitors.
Mercer Investment Consulting is a leading global provider of investment
consulting services, and offers customized guidance at every stage of the
investment decision, risk management, and investment monitoring process. It
has been dedicated to meeting the needs of clients for more than 30 years,
and works with the fiduciaries of pension funds, foundations, endowments and
other investors in some 35 countries.
Mercer Investment Consulting is a unit of Mercer Human Resource
Consulting, an operating company of Marsh & McLennan Companies, Inc. (MMC).
MMC lists its stock (ticker symbol: MMC) on the New York, Chicago, Pacific
and London stock exchanges.
Contacts:
Jaquilin Ang
Regional Marketing Leader
Asia Pacific
Tel: +65-6327-3420 / +65-9642-4998
Email: jaquilin.ang@mercer.com
Garry Hawker
Regional Business Leader
Mercer Investment Consulting, Asia
Tel: +65-6327-3519
Email: garry.hawker@mercer.com