Total fee income from a typical global equity fund has risen by 70% in the past six years even though annual percentage costs have been cut by 7% by investment managers on average, according to the report by analysts at LCP.
This “fee paradox” comes as markets have rocketed in the past six years, driving a typical £50m global equity fund’s total fee income from around £375k then to £637k today.
The report said “mediocre performance” was being rewarded with a “substantial fee increase” thanks to the paradox.
The analysts said RPI inflation alone would only have generated a £64k rise in fees over the period.
The rise in overall fee take comes as average headline fees from the same type of portfolio have fallen from 0.75% to 0.70% in the same period.
LCP said the research was based on a survey of 126 asset managers, with 77 responses received.
The report also attacks the industry for inconsistent reporting of transaction costs.
