U.S. institutional investors paid $1.5 billion in management fees in 2022, according to a new report by investment consulting firm Callan.
The report, which analyzed mandates by more than 300 investment firms and more than 180 institutional investors, found 98 per cent of the total fees paid in 2022 went to active managers, up one per cent from 2021. Half (50 per cent) of the total active fees were allocated to just 12 per cent of the investment management firms.
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Nearly two-thirds (62 per cent) of the total assets reviewed were actively managed, compared to 38 per cent that were passively managed. The highest average basis point fees were allocated to hedge fund-of-funds (107 basis points) and private real assets (83 basis points), while the asset classes with the lowest basis point fees were U.S. large cap (1.9 basis points) and small cap (three basis points).
“Our study shows continued pressure on actual fees paid for not only active management but now passive mandates as well,” said Ivan Cliff, Callan’s director of research, in a press release. “The rate of decrease in active fees appears to be slowing as they perhaps approach limits for quality implementation [since] negotiated discounts are already common and sizeable.”
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