The highest average basis point fees paid out to investment managers by institutional investors in 2022 went to hedge funds of funds (107 basis points) and to private real assets (83 basis points), according to the 2023 Investment Management Fee Study from investment consulting firm Callan.
In contrast, the lowest average basis point fees went to passive U.S. large-cap managers (1.9 basis points) and to passive small-cap managers (3 basis points), said the study, which was released on Nov. 29.
According to Callan's last study issued in 2021 looking at 2020 data, the highest average basis point fees also went to hedge funds-of-funds (117 bps) and private real assets (84 bps). The lowest went to passive U.S. large cap (2 bps) and passive core fixed income (3 bps).
In the latest study, some 98% of total fees paid out to investment managers by institutional investors in 2022 went to active managers, a 1% increase from 2021.
The study also found that 62% of total assets were managed actively, the same figure as in 2021, while 50% of total active fees went to only 12% of investment management firms.
Meanwhile, passive management represented 38% of total assets, same as in 2021, and about 2% of fees, down from 1% in 2021.
Callan noted that its 2023 study reflected trends in 2022 fees representing $609 billion in assets under management and $1.5 billion in total fees paid. The firm's fee database includes mandates run by more than 300 investment firms for more than 180 institutional investors.
"Our study shows continued pressure on actual fees paid for not only active management but now passive mandates as well," said Ivan Cliff, study author and Callan's director of research, in a release issued in conjunction with the study. "The rate of decrease in active fees appears to be slowing as they perhaps approach limits for quality implementation, as negotiated discounts are already common and sizable."
Callan advises clients with more than $3 trillion in total fund-sponsor assets.
