24/01/2013
Hedge funds around the world moving to 1.5%/20% pricing model, according to Mercer
Due to an abundant supply of high quality active asset management, the level and structure of commissions for actively-managed products held out remarkably well against a slowdown in demand in 2012, Mercer finds in its “2012 Global Asset Manager Fee Survey.” However, hedge fund managers were required to sacrifice the traditional 2% management fee and 20% performance commission cost structure, in favour of a 1.5%/20% formula. This comes due to the fact that the dynamics of supply ad demand have driven managers to be more accommodating when negotiating fees. The Mercer study, which covers over 25,000 funds from 5,000 asset management firms, also finds that the majority of asset management firms maintained their fees “relatively unchanged,” while fee reductions were concentrated on equity mandates, and retail equity funds tended to reduce their fees more sharply than institutional funds and mandates. About one third of asset managers increased their commissions, particularly managers of small cap funds, except in the United States, where commissions fell for this type of strategy. For all asset classes as a whole in US dollars, Canada is the lest expensive country for investments, with average fees of 0.3%, compared with 0.4% in the United Kingdom and 0.5% in continental Europe. Emerging market funds are the most costly, with an average of 0.89% (0.75% for Asia).
