A heightened focus on areas such as real assets, private equity and hedge funds or alternatives within pensions – rising from 10.6% to 20.6% of the average portfolio – has driven up costs, the report by bfinance said.
It said the average pension cost globally had risen from 0.378% ten years ago to 0.573% today.
That represents a proportional price rise of 51.6%.
At the same time weightings in far-cheaper public equity markets have fallen from 56% to 44% in the past decade, according to the data which covers funds in the CEM global database.
“We strongly hope that today’s institutional portfolios, although apparently more costly than before, will also be more robust and diversified, delivering stronger net performance for stakeholders over the long term,” the report said.
“Yet it will take years if not decades to determine success.”
However, the report also found that downward pressure on fees generally in the global savings industry had reduced fees in most asset types, even if the focus on pricier investment types had pushed up overall averages.
The report found that the average global equity management fee had fallen by 8%, while low-volatility management fees were down 25% and smart beta was down 24%.
Funds of hedge funds had cut their fees by 20% globally and almost 30% in Europe, the report found. Overall private equity fees had not shown clear signs of falling, as high demand kept prices at past levels, although European private debt had fallen by more than 30%.
The new popularity of unconstrained fixed income mandates had bred “premium fee confusion”, the report said, with fees “highly dispersed around a 48 basis points median… and costs bearing surprisingly little relation to the nature of products”.
The ‘Investment Management Fees: New Savings, New Challenges’ report was issued by bfinance, a London-headquartered global institutional investment consultant.
