Alternative Managers Feel the Pinch

Cost conscious plan sponsors put downward pressure on fees: Mercer.

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story_images_money-crisisThe dynamics of supply and demand have caused asset management fees in alternatives to drop, Mercer’s 2012 Global Asset Manager Fee Survey has found.

Asset managers are getting increased pressure to negotiate fees for hedge funds, direct private equity and infrastructure funds.

“Given the plentiful supply of good-quality active management, the level and structure of active fees have been remarkably resilient to a slowdown in demand. As we move from a defined benefit-based pension system to a defined contribution-based pension system—which is much more cost-conscious—our hope and expectation is that we see some innovation in this area as, otherwise, the demand for active management may well fall off a cliff,” said Divyesh Hindocha, global director of consulting for Mercer’s investments business.

The survey also found that about one-third of managers have increased their fees overall. But after taking all asset classes into consideration Mercer found that Canada remains the most inexpensive country in which to invest, with average median fees of around 0.3%.

The U.K. and Europe are also relatively low priced, with average median fees of around 0.4% and 0.5%, respectively.

Emerging markets remain the most expensive region at 0.89% on average, with Asia averaging 0.75%, a decrease of 0.08% since 2010.

The survey analyzes data on more than 25,000 asset management products from more than 5,000 investment management firms.

This article originally appeared on Benefitscanada.com

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