NEW YORK — When it comes to saving fees for management of equity strategies, Canada could be the place to go.
According to a new study by Mercer Investment Consulting, New York, institutional asset management fees charged for equity strategies in Canada were, on average, the lowest around the world, while fees for the same asset category in Asia were the highest.
According to the study, institutional asset management fees were a particularly good bargain when it came to large-cap/all-cap products in Canada, costing about 30 basis points.
Large-cap/all-cap strategies in Australia, New Zealand, the United States and United Kingdom averaged between 40 and 50 basis points, while the same asset categories in Europe, Asia and Japan averaged 50 to 70 basis points, the study said. The averages were given from various portfolio sizes ranging from $25 million to $200 million.
As expected, small-cap equity was most expensive across the board. Canadian and U.S. small-cap managers got a premium of 25 to 30 basis points over their fees for large-cap/all-cap products, compared with a premium of 15 to 20 basis points in Europe, Japan and the United Kingdom.
Asset management fees for major emerging market equity categories averaged 90 basis points overall worldwide, according to the study .
Hedge funds commanded the highest fees of all investment strategies tracked, with 175 basis points for investments ranging from $25 million to $200 million in direct funds. Hedge funds of funds got 130 basis points, whether the investment was $25 million or $200 million, the study said.
Among all asset classes, the lowest fees were for U.S. index funds. Fees for U.S. large-cap/all-cap equity indexes averaged 0.9 basis points for a $25 million portfolio to 0.5 basis points for a $200 million portfolio.
In an interview, Divyesh Hindocha, Mercer Investment Consulting worldwide partner and global director of consulting, said the study was particularly important now because investment returns from capital markets are generally expected to be lower than they were in the 1990s.
"In that context, fees can drag on the net investment results, which means our clients are placing greater emphasis on fees," Mr. Hindocha said.
Mercer said the study was based on data reported as of July 31 by more than 2,800 firms in the United Kingdom, Europe, the United States, Canada, Asia, Japan, Australia and New Zealand. The study covers 164 mandates in traditional and alternative asset classes worldwide, with more than 15,000 strategies.