bfinance: Investment management fees enter new downward phase
bfinance, the award-winning investment consultant, has published new analysis revealing that investment management costs appear to be entering a new downward phase. A near two-decade decline in public market fees is spreading out to private markets in the 'turbulent twenties', according to the latest instalment of the consultancy's Fee and Cost Insight series.
A new cost-compression front opening up in private markets
Private market fees had beenbroadly stable at the start of the 2020s, even as public market costs declined. That stability is now much less assured, and it appears that the near two-decade decline in public market fees since the Global Financial Crisis (GFC) may now be broadening out across the wider investment management industry.
The nature of today's pressures constitutes a departure from most of the post-GFC era, explains Olivier Cassin, Managing Director at bfinance. 'Fee declines in the 2010s were largely driven by public market passive competition, smart beta adoption, and the low-rate environment. Today's pricing pressures are more closely linked to private markets performance challenges, fundraising difficulties, and evolving competitive dynamics.'
Simultaneous to building pressures in private markets, public markets look to be confronting new ones. A higher-for-longer interest rate environment, for instance, is presenting challenges for active bond managers. It is stimulating growth in the active fixed-income ETF sector – there are parallels here to the impact that a low-rate environment had in spurring the growth of passive equity products.
Various bfinance sources are now pointing in the same direction
Drawing on its manager search work, fee analysis and survey data, bfinance has identified meaningful cost reductions across several public and private asset classes since the early 2020s. In private markets, more than two-thirds of limited partners polled in a global fees survey as part of the analysis noted considerable fee reductions in direct lending strategies over the past three years. In addition, nearly half cited reductions in infrastructure and real estate, while 39% noted lower private equity fees.
In public markets, the median quoted fee discovered in the process of bfinance searches for global emerging market pooled equity funds ($100 million allocations) has fallen by approximately 13%, from 69 basis points (bps) in 2021-22 to 60 bps in 2025-26. Although the consultancy has observed pricing pressure in global equities, the factors driving this are more nuanced, both from the perspective of the funds being promoted, and investor demand.
Meanwhile, there was a 12% decline in the median quoted fee for European high yield credit separately managed accounts ($100 million allocations) between 2020-22 and 2025-26, from 34 bps to 30 bps.
Stated fees and actual fees are diverging
The stated fees in bfinance private markets searches have remained broadly flat, but the consultancy has found actual fees available to investors are falling faster, driven by first-close discounts and fee holidays that do not appear in headline benchmarking data. This supports the downward trend identified by the global fees survey.
'Private markets are experiencing a growing divergence between stated fees and actual fees available to investors,' explained Kieren Bussey, Senior Associate, Portfolio Solutions. 'Managers are increasingly using discounts, fee holidays, first-close incentives and other mechanisms that may not be visible in benchmarking data. In many cases, real pricing is moving faster than formal fee schedules suggest.'
In addition, the report finds a widening gap between investor segments. Large, established institutional allocators are best positioned to benefit from enhanced negotiating leverage, while smaller institutions and newer wealth-sector entrants have less access to favourable terms.
Semi-liquid funds marketed to wealth clients are materially more expensive than equivalent institutional products, even after intermediary-negotiated discounts are factored in, raising pointed questions about value for money for a client segment that is already less able to access favourable terms.
Savings are available but not everyone is capturing them
So, despite widespread evidence of fee compression, transparency stays a major obstacle, particularly in private markets where complex frameworks and limited disclosure can obscure true costs. 'The conversation is no longer simply about whether fees are falling,' Cassin added. 'The more important question is who is benefiting, where the real savings are occurring, and whether investors have the visibility needed to assess value for money. As pricing structures become more complex, robust benchmarking and governance remain critical.'
