Fee pressure continued as more institutional investors were moving to passive strategies in 2020, although some asset classes proved resilient, according to Callan's latest investment management fee study.
The study, which compiled data across Callan's manager database, reflects trends on 2020 fees and shows 62% of the total $598 billion in assets under management measured were managed actively in 2020, down from 70% in 2018.
The overwhelming majority of total fees paid, meanwhile, still went to active managers, with 97% of total fees paid in 2020, down from 98% in 2018.
The study says the asset classes that showed the highest increased passive usage were domestic equities across all capitalization sizes, along with core fixed income.
Ivan "Butch" Cliff, executive vice president and director of research at Callan and author of the study, said in a phone interview that asset owners continued to move to passive domestic large-cap equities, with fees totaling $160 million in the manager database, down from $167 million two years earlier.
Passive strategies took 69% of the domestic large-cap market share, compared to 61% two years earlier, Mr. Cliff said. While he said that was not surprising given the trend, the move to passive was "spreading to other areas where traditionally believe more in active management."
He pointed to domestic small-cap equities, where passive strategies accounted for 27% of the market share, up significantly from 17% from two years earlier, as well as core fixed income, where the passive market share increased to 48% from 44%.
Mr. Cliff also noted that fees continued to be resilient within private strategies, and surprisingly, also in international equities.
"This change in the marketplace between primarily (MSCI) EAFE benchmark mandates that excluded emerging markets to (MSCI) ACWI ex-US for your international equity managers that included emerging markets, those have a fee premium over EAFE mandates," he said.
He also noted international small-cap equities displayed fee resilience primarily for capacity reasons and the costs of running those strategies.
Mr. Cliff also noted continuing concentration within the active money manager industry. The new study shows that 50% of total fees went to 11% of money management firms.
The study can be downloaded by their subscribers at Callan's website.
