Investment management fees enter new downward phase as pricing pressure spreads to private markets, finds bfinance study
Olivier Cassin
bfinance, the award-winning investment consultant, has published new analysis revealing that investment management costs appear to be entering a new downward phase. A near two-decade decline in public market fees is spreading out to private markets in the ‘turbulent twenties’, according to the latest instalment of the consultancy’s Fee and Cost Insight series.
A new cost-compression front opening up in private markets
Private market fees had been broadly stable at the start of the 2020s, even as public market costs declined. That stability is now much less assured, and it appears that the near two-decade decline in public market fees since the Global Financial Crisis (GFC) may now be broadening out across the wider investment management industry.
The nature of today’s pressures constitutes a departure from most of the post-GFC era, explains Olivier Cassin, Managing Director at bfinance. “Fee declines in the 2010s were largely driven by public market passive competition, smart beta adoption, and the low-rate environment. Today’s pricing pressures are more closely linked to private markets performance challenges, fundraising difficulties, and evolving competitive dynamics.”
Simultaneous to building pressures in private markets, public markets look to be confronting new ones. A higher-for-longer interest rate environment, for instance, is presenting challenges for active bond managers. It is stimulating growth in the active fixed-income ETF sector – there are parallels here to the impact that a low-rate environment had in spurring the growth of passive equity products.
Various bfinance sources are now pointing in the same direction
Drawing on its manager search work, fee analysis and survey data, bfinance has identified meaningful cost reductions across several public and private asset classes since the early 2020s.
Stated fees and actual fees are diverging
“Private markets are experiencing a growing divergence between stated fees and actual fees available to investors,” explained Kieren Bussey, Senior Associate, Portfolio Solutions. “Managers are increasingly using discounts, fee holidays, first-close incentives and other mechanisms that may not be visible in benchmarking data. In many cases, real pricing is moving faster than formal fee schedules suggest.”
In addition, the report finds a widening gap between investor segments. Large, established institutional allocators are best positioned to benefit from enhanced negotiating leverage, while smaller institutions and newer wealth-sector entrants have less access to favourable terms.
Semi-liquid funds marketed to wealth clients are materially more expensive than equivalent institutional products, even after intermediary-negotiated discounts are factored in, raising pointed questions about value for money for a client segment that is already less able to access favourable terms.
Savings are available but not everyone is capturing them
So, despite widespread evidence of fee compression, transparency stays a major obstacle, particularly in private markets where complex frameworks and limited disclosure can obscure true costs.
“The conversation is no longer simply about whether fees are falling,” Cassin added. “The more important question is who is benefiting, where the real savings are occurring, and whether investors have the visibility needed to assess value for money. As pricing structures become more complex, robust benchmarking and governance remain critical.”
