Subadvisers now manage about 20% of all long-term (nonmoney market) mutual funds, according to data from Financial Research Corp. About 42% of all international equity funds, for example, are managed by subadvisers, FRC found.
The median management fee for subadvised funds was higher than for internally managed funds - 0.65% vs. 0.55%. Subadvised domestic equity funds carried an average 0.70% management fee compared to 0.68% for in-house managed funds.
But, for the year ended March 31, subadvised funds returned an average 17.35% compared to 16.63% for in-house funds, FRC found. Over three years ended March 31, subadvised funds returned a cumulative 59.62% vs. 56.55% for internally managed funds. Subadvised funds in all assets classes performed better than internal funds over the three years, with U.S. equity funds doing so by the widest margin (cumulative return 98.02% vs. 93.35% for internal funds).