08/09/2011
By Matt Ritchie
Lowering fees may be an unavoidable move for many European active managers, according to a new publication from Cerulli Associates.
Announcing publication of its European Fund Fee Analysis, Cerulli said a rise in passive investing, regulatory change, mounting criticism about punitive fees, overtrading, and closet indexing have forced active managers to address their pricing strategies and product development plans.
Senior analyst in Cerulli’s London office Yoon Ng said that pricing power lies with the best performing managers, and those who can command a price premium will.
“However, the weaker players, those without strong distribution networks or performance, will find it increasingly challenging to justify fees against their beta peers. As profits margins come under increased pressure, some managers may struggle to stay in the race,” Ng said.
Although active managers and funds of funds face the greatest fee pressure, Cerulli maintained that the active investment model was not “broken”, and it still appears active managers deliver value.
“Passive funds only managed to outperform active funds in two of the five asset classes, namely mixed assets and commodities. Active funds have proved themselves superior over a three-year time period in equities, alternatives, and fixed income, even with management and administrative fees taken into account,” Ng said.
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