Increased scrutiny from cost-conscious investors has seen asset management fees across most non-traditional asset classes fall, according to a report from consultancy firm Mercer.

However, while fees for hedge funds, private equity, infrastructure and real estate have all decreased, the 2010 Asset Manager Fee Survey has found that fees for traditional asset classes have varied, with some increases.

Global director of consulting for Mercer’s investment consulting business Divyesh Hindocha said the impact of the financial crisis is still being felt by companies and investors.

“Although not universal, subdued investment returns have taken the edge off many alternative asset products. Combined with an increased focus on operational costs this trend has put growing pressure on asset managers to reduce the complexity of their products and lower their fees in the pricey alternatives arena.

“We believe there is room for further simplification and larger reductions in the overall fees charged by asset managers,” Hindocha said.

For the traditional asset classes, the survey found that median fees for global emerging markets equity averaged around 1% up from 0.9% in 2008.

Small cap equity fees averaged around 0.89%. Global and regional equity strategies average 0.7%, while fixed income continued to be the cheapest traditional active asset class with average fees around 0.35%.

With an average fee of 0.68%, pooled funds are more expensive than segregated fees across all comparable mandate sizes, the report said. There was no change in average fee levels for pooled vehicles between 2008 and 2010 - across all mandate sizes.

Average fees for mandate sizes of $25 million have decreased, though average fees have increased for mandates $100m and $200m. Segregated fees have gone up by an average of 0.7 basis points, with the larger mandates increasing by slightly more.

“One explanation for the increase in segregated fees is that managers are using fees to ration out demand for those asset classes where there are capacity issues,” Hindocha said.

The report compares data by regions, determining that Canada is the least costly with average fees of around 0.3%. The UK and Australia follow with average fees of 0.46% and 0.47% respectively. Emerging markets remain the most expensive, at around 0.87%, with Asia-Pacific a close second at 0.83%. Japan, Europe and the US all range between 0.57% and 0.7%.

The bi-annual report analyses fee data on more than 20,000 asset management products from over 4,000 investment management firms. The survey covers asset managers in a range of geographies and across numerous products including pooled and separately managed accounts.

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