Bringing you live news and features since 2006 

Hugues Gillibert, Fitz Partners

Drop in fund investment advisory fees continues, says Fitz Partners


In the latest edition of its ‘Investment Advisory Fee Benchmarking Report’, independent fund research company Fitz Partners gives a unique insight into the level of investment advisory fees charged by asset managers. 

Fitz Partners’ research is based on asset managers’ confidential fee schedules and exposes the true cost of investment advisory, defined as the fees paid to entities providing advisory services to the fund. Advisory fees, which would cover asset allocation and stock selection are usually paid out of the funds’ management fees.

Hugues Gillibert, Fitz Partners CEO, says: “It has become ever more imperative for asset management firms to measure the level of fund investment advisory fees as it represents a significant part of their funds management fees and would impact asset managers’ revenues substantially. At a time when talks of squeezed margins are widespread, there is a real need for asset managers to be able to benchmark the internal structure of their management fees.”
In the past few years, we have seen management fee levels decreasing whilst the investment advisory fees were still rising until last year when a downward trend began in the overall level of investment advisory fees.

Overall, the average investment advisory fee has fallen by 9 per cent from 0.393 per cent to 0.358 per cent in the last 12 months reinforcing the sentiment of pressure that started last year. Over the last two years, investment advisory fees have dropped by a significant 13 per cent while “gross” management fees (including distribution fees) have come down by 19.4 per cent since 2015.
When looking at equity funds (all sectors), the share of management fee paid for investment advisory has increased by 27 per cent over the last five years as the “quoted” level of gross management fee charged by funds has been receding at a quicker pace than some of its internal parts. Therefore the remaining revenue or margin received by fund houses from management fees, after any investment advisory and distribution fees, has been dramatically reduced. This change in advisory fee proportion would also have a significant impact on asset management firms using shared revenue ratio in their Transfer Pricing rules.
Gillibert says: “Although we are seeing a definite decrease of investment advisory fees levels, this reduction is still slower than that of quoted management fees. The difference in both reduction rates reflects, on one hand the greater pressure on publicly quoted fees coming from investors and distributors but on the other hand, a lack of elasticity when it comes to the pricing of funds’ investment advisory function be it from resisting internal teams on which their remuneration depends or pressure from static internal transfer pricing rules.”

Latest News

BlackRock’s global ETP flows report for June finds a steady rise with USD128.1 billion added to global ETPs in June,..
Morningstar’s global ETF flows report for the first half of 2024 shows that actively managed ETFs have captured 25 per..
The surge in bitcoin ETF launches and funds flowing into the sector is transforming institutional investment in digital assets but..
LSEG Lipper’s latest research finds that the majority of actively managed funds and ETFs globally were not able to beat..

Related Articles

Chris Lo, Columbia Threadneedle
In a recent insight on India by Columbia Threadneedle Investments, the firm reports that the country’s economic reforms, which aim...
With an election on the horizon in the United States a group of ETFs is poised to capture investments on...
Robot worker
Qraft Technologies, based in South Korea, specialises in the use of AI in security selection and portfolio construction....
Andrea Busi, Directa SIM
Romain Thomas talks to Andrea Busi (pictured), CEO of Directa SIM, who explains why the online trading platform has just...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by