Home / Analysis / Frontier going hard-line on fees

Frontier going hard-line on fees

Analysis

(pictured: Damian Moloney) 

Frontier Advisors is turning up the heat in the increasingly widespread debate about funds management fees, with its chief executive putting pen to paper for a thought-leadership piece which updates previous work by the asset consultancy.

The latest paper, “Progressing a New Deal on Fees: Ideas for Institutional Investors” aims to: “Reiterate the most challenging and significant of the current fee issues, propose a number of approaches that might assist the institutional investor in getting value for its fee budget and also highlight some recent positive outcomes on investment management fees.”

  • Perhaps the most contentious recommendation – although not new to Frontier clients – is that the standard ad valorem fees should be resisted at every opportunity in favour of a simple CPI/AWOTE- adjusted fee off a flat or fixed-dollar base.

    The paper adds that: “Performance fee structures with no minimum level of performance, or the cash rate, generally have no place in today’s investment marketplace”

    Scale discounts need to be greater, reflecting the marginal cost to the fund manager of the additional funds being managed.

    Managers with “favourable and acceptable fee structures” should be rewarded with future fund flows and long-term mandates”, Moloney says.

    “Investment management costs are a key drag on the net return and therefore should be continuously, objectively and specifically assessed for value.”

    Investor Strategy News




    Print Article

    Related
    How the Future Fund (and others) think about the total portfolio approach

    TPA is an “uncommon and demanding” approach to running an investment organisation, according to the Future Fund, but a rewarding one – as long as institutions that take it up know that it’s not a transformation that should be embarked upon lightly.

    Lachlan Maddock | 22nd Mar 2024 | More
    How this global giant plans to become a go-to manager for super

    The AUD$660 billion M&G has been a “sleeping beauty” down under, and it wants more than the mandate it already runs for the Future Fund. Thinking like an asset owner is part of the equation.

    Staff Writer | 22nd Mar 2024 | More
    How big investors are getting more bang for their RI buck

    More and more of the global institutional investor set is turning to thematic strategies even as they resist the use of ESG benchmarks amidst questions about the methodologies that underpin them.

    Lachlan Maddock | 13th Mar 2024 | More
    Popular