Pension funds are enjoying somewhat of a post-crisis golden age of asset management as they simultaneously experience better value for their money while negotiating lower fees, according to a report.
A bfinance survey of 48 pension plans in Europe and North America finds that 28% of respondents report lower base fees, while 3% say they are higher and 69% indicate they are unchanged. Nineteen percent of respondents note their performance fees are lower while only 2% of respondents say they are higher and 79% report them as unchanged.
The survey also finds that some pension funds are looking to have performance fees calculated over a longer period. Twenty-three percent expressed a preference for fees to be calculated over a four-year period and 23% over a five-year period, up from last year’s figures of only 13% and 16%, respectively.
Almost one-quarter (23%) of funds polled intend to increase their allocation to active managers for equity mandates while 19% of funds favour passive strategies for equity mandates and 58% report no change. Last year 9% of funds opted for more active equity mandates, while 28% moved toward passive mandates and 63% reported no change in their strategy.
While some pension funds are willing to enter into lock-up regimes in exchange for lower management fees, nearly half (44%) are not. Of the 56% who are willing to do so, 26% are prepared to concede to a one-year lock up, 12% for a two-year lock up and 18% for a three-year lock up. The results, according to bfinance, demonstrate the importance of liquidity and the ability to terminate mandates quickly.
“While there is still ongoing concern over fees, unsurprisingly, pension funds seem more satisfied with the value for money that their managers are providing than they were a year ago during the height of the crisis when we conducted our last survey,” says David Vafai, CEO of bfinance. “That being said, fees have gone down and seem likely to continue to be a hot topic in 2010.”