Fund research firm Fitz Partners found average investment advisory fees, those paid for managing the fund including asset allocation and stock selection, increased by 17% over the last three years, from 35 basis points to 41bps.
However, at the same time average gross management fees, including distribution fees, dipped from 1.06% to 1.02%.
The Investment Advisory Fee Benchmarking Report which quizzed 16 cross-border asset management firms, also found on average the share of management fee paid for investment advisory increased by 22% over the three years. For equity funds the increase was 20%.
Fitz Partners said this meant the remaining revenue or margin received by fund houses from management fees after investment advisory and distribution fees has in effect shrunk.
Hugues Gillibert, chief executive at Fitz Partners, said close monitoring of bundled fees has become essential.
He added: “We are seeing a further increase in one of the components of fund fees impacting funds’ profitability. Internal discussions in fund houses are becoming more focused. Fee benchmarking is not only a question of overall level of funds costs for investors, it is also about good business practice and margin preservation.
“When looking at trends in investment advisory fees and management fees for UK and European cross-border funds, we can see clearly that both charges are not moving in the same direction. Over the last three years, management fees overall have gone down slightly while investment advisory fees have increased substantially.”
