GLOBAL - Pension funds believe investment management fees are too high and need to come down, a study by bfinance has found.
However, the majority of pension funds believed they got value for money from passive equity managers - with 96% of respondents declaring it good or fair.
bfinance managing director of research and development Olivier Cassin said: "Clearly, investors are still willing to pay performance fees to reward long-term skill but are no longer willing to pay active fees for beta or for 'luck'."
Hedge Fund managers agreed that fees would likely go down and indicated they expect the median level for base fees for FoHFs to decline 9% to 95 basis points and for the median level of performance fees for hedge funds to decline 25% to 13%.
Although more than half of pension funds surveyed wanted an unconditional reduction in base fees, a substantial proportion would be willing to accept longer lock-up periods in exchange for lower fees.
Conversely, 68% of managers indicate that they would be willing to offer a base fee discount for a two year lock-up and 79% of managers would be willing to do so in exchange for a three year lock-up.
bfinance chief executive David Vafai explained: "Although the study indicates disenchantment with the industry in general, and disenchantment with Fund of Hedge Funds and GTAA managers comes out particularly clearly, the study also rather paradoxically suggests that allocations to FoHFs, as well GTAA, infrastructure, real estate and private equity fund of fundsare set to increase in the future."
The Pensions Regulator (TPR) has set out plans to use "new regulatory initiatives" with over 1,000 schemes as it aims to tighten its regulatory grip and boost member outcomes.
HM Revenue and Customs (HMRC) has announced it is delaying the provision of data that will enable pension schemes to confirm the guaranteed minimum pension (GMP) benefits to pay to members until the end of the year.
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