Investment management fees for open-end real assets funds can reach as high as 20 per cent, while median fees cost institutional investors either 10 per cent or 15 per cent, according to a new study from Callan.
The study, which reviewed 144 real assets partnerships across real estate, infrastructure, farmland and timberland, found the median management fee for core real estate equity funds is 96 basis points, based on a US$25 million net asset value. Value-add funds had the highest fees at 130 bps.
Only 38 per cent of the funds in the study charged a performance fee and among those, European waterfalls (84 per cent) were the most common.
Read: Institutional investors paying up to 2% in private equity management fees: report
According to the report, more than two-thirds (63 per cent) of open-end real assets funds have a redemption queue that’s pro rata based on net asset value while 53 per cent have redemption notice periods of 90 days.
It also found the median preferred return across all strategies charging a performance fee was seven per cent, excluding core real estate equity funds since only four of the reviewed funds have performance fees.
The report said despite seeing a standardization of these funds, institutional investors are looking for competitive benefits when picking funds, like redemption notice periods and queue methodology as well as lower fees.
“What stands out in the study is how many institutional open-end options exist today and how seemingly minor differences in fees and terms can impact investors,” said Aaron Quach, vice-president at Callan’s real assets consulting group and the report’s author, in a press release.
Read: Expert panel: Institutional investors should re-evaluate fees in ‘turbulent twenties’