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ESG funds continue to attract lower fees

ESG, funds, attract, lower, feesESG funds remain cheaper than non-ESG products, according to research by Fitz Partners.

The number of ESG-labelled fund products in Europe grew by 89% last year, while the gap between ESG and non-ESG management fee averages has reduced to 2bps in the previous twelve months.

On average, ESG-labelled equity fund management fees, free of any retrocessions, stand at 0.78%, while the corresponding fees for non-ESG remain higher at 0.80%.

For ESG-labelled bond funds, clean management fees average 0.50%, while non-ESG costs also remain higher at 0.53%.

The review is based on a universe of over 4,000 clean share classes for equity and bond cross-border funds covering $500 billion in assets. Contrasting with the same study a year ago, the number of cross-border ESG-labelled equity and bond products increased by 89%.

Hugues Gillibert, Fitz Partners CEO, said: "For a few years now, new launches of ESG-labelled funds have weighted significantly in the universe of ESG funds and have kept management fees lower on average than non-ESG fund products in Europe.

"In the past year, a fair share of the increase in ESG labelled funds has come from the repositioning of existing funds as ESG products. Unlike new fund launches, these funds new to the ESG universe have not altered their pricing while transitioning to ESG and have inflated the overall ESG fund costs."

In this latest research, Fitz Partners isolated clean share classes that were in existence 12 months ago and were not labelled as ESG then but have since been repositioned or labelled as ESG in the last year.

These newly labelled share classes still show an average clean management fee in line with current non-ESG funds at 0.80% and 0.55% for equity and bond funds, respectively.

In last year's review, average fees for ESG-labelled equity and bond funds showed lower averages, at 0.76% and 0.46%.

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