Nearly all (97 per cent) of fees paid by institutional investors go to active managers, virtually unchanged from 2023 (98 per cent), according to a new report by Callan.
The report analyzed mandates run by more than 300 investment firms for nearly 180 institutional investors, representing US$784 billion in assets under management and $1.9 billion in total fees paid. It noted 61 per cent of total assets were managed actively and half (50 per cent) of total active fees went to just 11 per cent of investment management firms.
Read: U.S. institutional investors paid $1.5 billion in management fees in 2022: report
The highest average basis point fees went to hedge fund-of-funds (113 bps) and private real assets (88 bps), while the lowest average bps fees went to passive U.S. large-cap (1.9 bps) and small-cap equities (3.1 bps).
Fee resilience was strongest for private real assets, hedge fund-of-funds and global and emerging equities, while fee weakness most impacted core-plus fixed income, U.S. small- and mid-cap equities, high-yield/bank loans and emerging debt.
Passive management usage in U.S. small- and mid-cap equities increased by six per cent from 2023 to 29 per cent, while passive usage for core fixed income increased two per cent to 47 per cent. Meanwhile, passive usage decreased slightly for both U.S. large-cap equities (down three per cent to 70 per cent) and global equities (down one per cent to 41 per cent). Public funds had the largest share of AUM by percentage of mandates (34 per cent) and assets (50 per cent).
Read: Institutional investors accepting higher management fees amid push toward alternative assets: expert