Analysis from LCP, shows notable fee reductions for UK institutional investors in key asset classes.

Increased competition and the pressure on fees from low-cost, index-tracking products have seen the average fee for an active global equity mandate fall by 11% since 2017, according to the latest edition of LCP’s Investment Management Fees Survey.

The survey – now in its 7th edition – also reveals notable fee reductions in a range of other key asset classes including multi-asset diversified growth funds, multi-asset credit, liability driven investment strategies and passive global equity mandates.

This edition of the LCP Investment Management Fees Survey is one of the first studies to use consistent and comparable transaction cost data for UK institutional investors.

Investment manager fees for pension schemes – 10 years on

Analysis from the report estimates that the typical £500m defined benefit pension scheme in the UK has seen a fall in total investment managers fees from 0.39% to 0.36% per annum. The largest contributing factor to falling fees has been the falling allocations to active equity mandates.

Other key findings included:

• Since 2017, active global equity fees have decreased by £40,000 and corporate bonds fees increased by £35,000 for a £50m mandate size.
• For the average active global equity pooled fund, transactions costs add 25% to the headline annual management fee (for a £50m investment).

Matt Gibson, Partner and Head of Investment Research, commented:

“Falling investment manager fees allow investors the opportunity to renegotiate their fees to the new market level. It is important to remember that reduced costs do not always result in value for money – fees and costs should be considered against the value the investment manager creates.

“A change in regulation at the end of 2017 allows for accurate and comparable analysis of transaction cost data for the first time in the history of the survey. We find that transactions costs vary widely in some asset classes and can be a significant part of the total cost of investing.”