Eighty per cent of managers subsidise fund expenses

A large number of cross-border managers distributing into Europe are funding their own funds’ operating expenses to keep client charges down as pressures in the industry mount, a new study reveals.

While nearly 80 per cent of fund managers subsidise funds’ expenses, 19 per cent of the recorded subsidies also exceeds funds management fees, says the Cross-border fund charges survey by research company Fitz Partners.

Elsewhere, 24 per cent of fund managers are currently applying a fee caps policy to at least one range of funds resulting in a lower level of operating charges figure for those funds compared with those without the caps.

Fitz Partners chief executive Hugues Gillibert says the study findings are “another sign” of fee pressures in the European fund market.

He says: “Many asset managers have put fee caps in place so that their funds remain competitive but some of their operating charges have exceeded these caps, forcing them to reimburse these costs or waive their own fees.

“Equity funds with expense caps show on average lower [operating charges] by 11bps, but this competitive edge comes at a price to the asset managers often forced to heavily subsidise their fund products.”