Investors looking for cheaper alternatives

Cutting costsEuropean retail investors are moving into alternative funds, as equity and bond markets continue to disappoint.

A report by global analytics firm Cerulli Associates, says that providers are making once closed-off vehicles more accessible, boosting liquid alternatives such as retail-friendly hedge funds.

The alternative fund space has more than doubled in assets under management since 2011, to €255 billion as of June this year.

Cerulli says that for managers to fully capitalise on this trend, they should rethink their pricing strategies. Barbara Wall, Europe research director at Cerulli, says that asset managers should cut their performance fee, especially if it’s just for outperforming cash.

The firm notes that some asset managers are already doing this. Aberdeen Asset Management's new Liquid Alternatives Fund, launched in August, has a total expense ratio of 1.7% but there is no performance fee.

There is some problems with transparency of these funds though, as they offer returns not correlated to the mainstream asset classes and tend to be more complex.

"Fact sheets often fail to provide the details of such matters, with managers arguing the information would serve no purpose,” says Brian Gorman, an analyst at Cerulli.

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