Virtually all fees that institutional investors paid in 2018 went to active managers, according to a study by Callan.
The study showed that 98% of total fees paid went to active managers, and that 70% of institutional assets are actively managed. In addition, fees being saved by clients in traditional equities and fixed income are being reallocated to private equity and non-core real estate investing.
Callan's study, based on data from the investment consulting firm's investment manager database, client performance reporting database and actual client fee schedules, reflects trends on 2018 fees and represents more than $500 billion in assets under management and $1.8 billion in total fees paid by investors.
"It's very competitive. Managers are willing to entertain fees that they wouldn't have in the past to win mandates," Ivan "Butch" Cliff, executive vice president and director of research at Callan said in a phone interview. "It can't go on forever, but it continues to go on now. We'll see how low it goes."
The study also revealed that fewer than 10% of money management firms received half of the total fees paid. Mr. Cliff said this was "not surprising" given the consolidation the industry is facing.
"More and more products are merging ... so it's a real concentration of success in a small number of firms," Mr. Cliff added.
The Callan executive noted one exception: non-U.S. equities seem "to have held their own from a fee standpoint." Mr. Cliff attributed this finding to asset owners lessening home country biases and that the MSCI ACWI ex-U.S. index now includes emerging markets.
