Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • 2023 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2023 Defined Contribution East Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 ESG Investing
    • 2023 Private Markets
Breadcrumb
  1. Home
  2. ASSET OWNERS
May 15, 2017 01:00 AM

Pension funds see fees rising in conjunction with move toward more alts — report

Sophie Baker
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Updated with correction

    The average large pension fund is paying out a higher proportion of its assets in investment costs than they were 10 years ago, due to allocations to new, illiquid asset classes, said bfinance.

    Research by the consultant found that a move toward more illiquid investments, new premium strategies promising higher yields and unexpected pricing resilience in certain asset classes have led to higher overall fees for institutional investors.

    The research, “Investment Management Fees: New Savings, New Challenges,” found that many investors have looked for fee savings through switching strategies, insourcing or by “dragging vendors back to the negotiating table.”

    Data by CEM Benchmarking cited in the report showed the average total costs in its global database, which primarily covers pension funds, have grown to 57.3 basis points, up from 37.8 basis points a decade ago. “The cost increase is primarily due to asset mix changes: combined policy weights for real assets, private equity and hedge funds (alternatives) increased from 10.6% to 20.6%. Public equity policy weights declined from 56% to 44% over the period,” said Mike Heale, principal at CEM Benchmarking, in the report.

    A number of asset classes and sectors have faced more fee pressure than others, and money management firms have responded by lowering costs. bfinance cited a £100 million ($128.8 million) global active equity allocation as an example, where the quoted pre-negotiation fee has fallen to 57 basis points for the period of January 2015 to March 2017, compared with 62 basis points for the period of January 2010 to December 2014.

    Smart beta strategy fees have fallen even more, down 25% since 2011. Low-volatility strategy fees have fallen 24% since 2010.

    However, within private markets strategies, managers often hold the “upper hand,” with fees remaining high and particularly so in infrastructure and private equity as demand outstrips supply, the report said.

    Within European and U.S. core-plus and value-added real estate strategies, management fees ranged between 80 basis points and 200 basis points per year. Comparisons were not available.

    “Why have certain very popular private equity managers done away with hurdle rates? The answer is very simple: because they could,” said Anne Feuillen, a senior director in bfinance's private markets division, in the report. “But this has a meaningful negative impact on net returns and reduces the alignment of interests between (general and limited partners). It is very hard for investors in this fundraising climate to say: 'no, that is a step too far.'”

    Related Articles
    Hedge fund 'casino' fees shunned by $19 billion pension fund
    Managers trim fees to keep U.K. fund assets
    U.K.'s Railpen cuts costs by moving investments in-house
    Corrections: PineBridge, bfinance report
    Morningstar: Fees lower than ever due to investors choosing different funds
    Alts managers' fees growing in recent funds – Preqin
    Fitch Ratings: Slower growth in alts managers' fee-earning AUM expected to chan…
    Recommended for You
    Stack_of_Money_i.jpg
    Wilshire TUCS plans post first positive return of year in Q4
    FTX_Screen_i.jpg
    FTX bankruptcy ensnares Kraft, Och and other family offices
    Innovations in DC: Moving Ahead on Retirement Outcomes
    Sponsored Content: Innovations in DC: Moving Ahead on Retirement Outcomes

    Reader Poll

    March 22, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    The Need for Speed in Trend-Following Strategies
    Global Fixed Income: Volatility and Uncertainty Here to Stay
    Morningstar Indexes' Annual ESG Risk/Return Analysis
    2023 Outlook: The Top Five Trends to Monitor in the Year Ahead
    Show Me the Income: Discovering plan sponsor and participant preferences for cr…
    The Future of Infrastructure: Building a Better Tomorrow
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • 2023 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2023 Defined Contribution East Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 ESG Investing
      • 2023 Private Markets