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Beverly Chandler

Cerulli report finds that fees are crucial for institutional investors

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Cerulli Associates reports that Europe's asset management industry is underestimating just how significant the fee factor is when consultants advise institutions on the selection of managers.

 The firm writes: “Several consultants have told Cerulli Associates that asset management fees are central in discussions with institutional investors. Yet, research by the global analytics firm reveals that asset managers regard the subject as of middling importance when 'selling' their wares to insurers' consultants, for instance.”
 
"The downward pressure on asset management fees from Europe's institutional allocators and their independent counsellors is still strong," says David Walker, European institutional research director at Cerulli. "It is folly for asset managers not to recognize the ranking of fees in the case gatekeepers make when advising on selection."
 
Consultants, notes Walker, are recommending that European institutions adopt a variety of tactics when it comes to fees, ranging from haggling, to demanding transparency, to linking fees to performance as well as assets.
 
In their report, Cerulli also highlights the emerging trend of U.K. institutions selecting fiduciary managers that both offer and then implement advice. "These fiduciary managers are investing ever more directly into financial markets, which is bad news for fund managers who might otherwise have been picked to do so for end-clients–whether for stocks or swaps and repos for hedging," says Barbara Wall, Europe research director at Cerulli. However, if fiduciaries offer their own funds to institutions and wish to charge decent fees for such products, they will find it increasingly difficult to argue to clients the asset management industry is too expensive.

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