by Patrick J. Schena
In recent months there has been considerable focus in the global investment community directed on the fee structures of investment managers. Periodically the scale of investment fees rises to the surface in the broader context of the active versus passive debate, particularly in down markets, only to subside when equity values recover.
What is interesting in this instance, despite the performance of equity markets globally since the financial crisis of 2008-09, is that a crescendo of voices is combining to keep the issue of investment fees squarely on the global agenda of investment managers and asset owners. So we ask: Will this time be different?
Over the past 2 years the case that management fees are “too high” has gained momentum, in both the media and professional journals, accentuated by high-profile cases of manager fraud, public outcries against opacity in fee reporting (as in the recent case of the North Carolina pension system), and provocative advice by the likes of Warren Buffet to go “low-cost”.
As importantly, commentary and anecdotal evidence has continued alongside new academic research and analysis and changes in the investment behavior of asset owners that lends strength to an argument of structural change in management fee structures. The article advances this argument by first clarifying the scope and offering some empirical context.