Active management fees on average dropped 4% in 2021, according to a report from Investment Metrics. After covering 353 managers with mandates greater than $30 million in 2021, the report found that managers of both U.S. and international funds who were focused on smaller and emerging market companies continued to collect higher fees than large-cap managers.
Small-cap managers earned a median fee of 75 basis points in the fourth quarter, compared to 55.6 basis points for U.S. large-cap managers, and 65 basis points for non-U.S. large-cap managers.
Small-cap managers also saw the least fee pressure in 2021. For U.S. portfolios, small-cap manager fees remained unchanged, even while fees dropped 4.3 basis points across the board. Large-cap managers also evaded the brunt of fee pressure, with fees dropping a median of 0.5 basis points.
The portfolio analytics firm said that of all the investment styles, global equity managers “made the most fee concessions,” with the median fee dropping 11%.
But despite the continued pressure on lowering active management fees, Brendan Cooper, senior research consultant at Investment Metrics, told Institutional Investor that “managers that are best in class and/or are consistently delivering alpha continue to command higher fees than their peers.”
Scott Treacy, research consultant at Investment Metrics, wrote in an outlook report that he expects active management fees “to stabilize and stop gravitating downward” in 2022.
“While many managers have been able to hold on to assets, significant numbers have also been fired for poor performance,” wrote Treacy. “At this point, high performing managers are able to retain their mandates and charge higher fees across all active product classes. We may even see active managers begin to fight back against active manager fee compression.”
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