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Money Management

Strategy, portfolio size big factors in difference between quoted, negotiated fees – report

Separate account fees generally drop as the sizes of investments by institutional investors increase, with the largest discounts taking place in domestic small-cap strategies, a report from eVestment shows.

The report, The State of Institutional Separate Accounts Fees, which covers 8,000 separate accounts in the research company's database, shows the largest difference between quoted and negotiated fees in domestic small-cap value equity portfolios of more than $250 million, at 34 basis points, following by large discounts of 30 basis points in small-cap growth strategies, also with portfolios of more than $250 million. Those discounts, however, decrease as the sizes of the portfolios decrease. Domestic small-cap value strategy fee discounts for portfolios of less than $100 million drop to 9 basis points, while small-cap growth strategy fee discounts for that same universe drop to 11 basis points.

All domestic midcap equity strategies saw the smallest discounts, with discounts of 7 basis points in portfolios of less than $100 million, while even in larger portfolios of more than $250 million, the fee discount is 15 basis points, well below small-cap strategies.

Domestic large-cap value and growth strategies each have 14 basis points discounts among portfolios of over $250 million, and unlike small-cap or midcap strategies see larger discounts with smaller portfolios. For portfolios of under $100 million, large-cap value and growth fee discounts jump to 18 and 15 basis points, respectively.

A copy of the report can be requested on eVestment's website.