Asset Management Fees

[Guest pension222]

A client has asked me about asset management fees.

They have been told that according to investment industry standards, that equity management fees should not exceed 50 basis points and that fixed income management fees should not exceed 30 basis points.

Does anyone have a web site or resource that I could use to address this issue?

[Jon Chambers]

I'd suggest that there is no single standard for determining appropriate asset management fees. It depends on account structure (retail mutual fund, institutional mutual fund, separate account, etc.) and amount of money to be invested. If the funds to be invested are in excess of $100 million, and are invested in separate accounts, the figures you cite seem reasonable. I'm not aware of any definitive website that could support or refute this contention, or of any general rule of thumb similar to what you report. If you really want an answer, buy the Greenwich Associates money manager survey, that includes some detailed fee information, but be prepared to spend a few thousand dollars for the survey.

Hope this helps,

[Guest Alan_Valenca]

You might want to also check out the recent article on PlanSponsor.com "Fee for All" which talks about the "transparency" of fees issue and some new ways of handling it with clients:

www.plansponsor.com/content/magazine/FeeForAll

Hope that helps.

[RCK]

What investment management fees "should" be is a function of several things, but chiefly the size of the fund and the kind of fund that it is.

A reasonable fee range for an actively managed small cap growth fund may be 1.00 to 1.25% per year. And the fee for a large Indexed equity fund could be in the 0.05 to 0.10% per year.

The investment management fee that we pay for a $200 million S & P 500 index fund is 5 basis points (or .05%). That is the result of a tiered schedule, that starts out at .2% and grades down to .03%.

RCK

[david rigby]

Another similar discussion.

http://benefitslink.com/boards/index.php?showtopic=10747