Independent investment consultancy, Bfinance, has found that reliable alpha does not necessarily come with higher cost charges for investors. Conversely, consistent and
outperforming managers tend to adopt a below average pricing policy.
Bfinance analysed the responses of over 650 investment managers to more than 100 tenders in conducing the research, evaluating data close to 3200 responses.
The key findings were:
According to the research, in a growing number of mandates managers are happy to propose alternative methods of remuneration based on performance fees, with this trend being strongest in equities strategies.
Ian Shea, head of equities at Bfinance, says: "Counter intuitively, the correlation between high quality asset management and fees is weak. The most adept managers are also those that are most inclined to be competitive on fees and inclined to work with asset owners to find creative performance fee solutions."
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- Fees diminish significantly as assets increase. Fees on mandates of €400 million decrease by 15% compared to €100 million mandates
- Active managers showing a genuine capability to outperform their benchmarks over time do not ask for higher fees
- The level of management fees quoted in the first stages of a tender procedure is not set in stone. Rebates achieved through negotiation represent on average 20% off the initially quoted price
- Alternative methods of remuneration based on performance fees are more frequent and better aligned with the interest of investors than they used to be.