The percentage of institutional investor assets that are actively managed has dipped by eight per cent since 2019, according to a new study by institutional investment consulting firm Callan.
The study, based on data collected from 160 U.S. institutional investors with US$598 billion in assets under management, found 62 per cent of assets held by institutional investors are actively managed, down from 70 per cent in 2019. While the percentage of passively managed assets increased overall, it was most common in allocations to U.S. small and micro cap equities. Active management of private real assets and global equity remained relatively stable.
Despite the decrease in actively managed investments, active managers still received 97 per cent of fees paid by institutional investors — down just one per cent from 2019. More than half of the fees paid by institutional investors were paid to just 11 per cent of asset management firms.
The study also found the difference between advertised fees from asset managers and the fees paid by institutional investors has grown since 2019. In a press release, Ivan Cliff, the study’s author and director of research at Callan, said active managers are frequently offering a significant discount for traditional asset class investing.
“Negotiated discounts below published fee schedules are significant, especially for large mandates whose AUM is firmly in the final tier of a fee schedule. In addition, passive management is now growing in public markets beyond U.S. large cap equity, particularly in domestic small cap equity and core fixed income.”