Investment management fees survey

Investment Pensions & benefits Investment strategy Investment manager research

Our survey report, produced since 2010, provides a comprehensive survey of investment manager fees in the UK and has proven to be an important resource for both institutional investors and the asset management industry.

Our latest survey of investment managers reveals a continuing trend of falling headline fee rates across most core asset classes. However, that headline hides a wide range of changes to fees and costs investors are paying.

For many asset classes, overall fees and costs can be both complex and opaque. Through our expertise and insights, we help clients better understand the fees they’re paying, how those compare with others, and ultimately support them in negotiating the right fee rate and structure.

Key findings from our report:

Headline rates for most asset classes are down since our last survey.
Active corporate bonds and global passive equity are notable exceptions, where fee rates have risen.
For some active asset classes, falling headline fees masked rising overall charges, suggesting that costs are being reallocated rather than cut.
Regulators have introduced a new option permitting investment managers to fund third-party research using investors’ money, potentially increasing costs for investors.

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Latest trends across core asset classes

Since our last survey, we have seen various developments in fee rates offered by investment managers for institutional investors across the core asset classes. We use an illustrative £50m mandate size to show the impact in real-money terms. Findings include:

Median Annual Management Charge (AMC) for global active equity asset class fallen by 0.07% or

£35k

However, surprisingly the Ongoing Charges Figure (OCF) has increased by 0.01% or £5k
Similarly for active ESG equities, the median AMC has fallen by 0.02% or

£10k

whilst the OCF has increased by 0.08% or £42k
For global passive equities, the median AMC has increased by 0.07% or

£33k
For global active corporate bonds, the median AMC has risen by 0.06% or

£28k
For listed infrastructure, the median AMC has fallen by 0.10% or

£50k
Across pooled dynamic LDI funds, we’ve seen a decrease in the headline median AMC of 0.09% or

£45k

Equity and bond fee rates are going in different directions

The downward trend for active equity fee rates in developed markets has continued, whilst bond fee rates are increasing according to our data. For example, global active equity fee rates are down; global active corporate bond fee rates have increased.

Since our last report, we’ve seen interest rates and yields materially increase, driving demand for funds across the credit spectrum and away from equities. Here we have broadly seen an increase in annual management charges. In particular, for active global corporate bonds we observed a 0.06% increase, or a £30k increase for a £50m mandate. As we settle into this higher interest rate environment, we see investors seeking more specialist managers to protect from downside risks and those specialists tend to charge higher fees.

Total costs increasing due to higher additional expenses

In various asset classes, we observed an increasing total ongoing charges figure (OCF) despite a general reduction in the headline AMC rates. In many cases, the increase in additional expenses is more than offsetting the reduction in the AMC.

The median additional charges cost rate for £50m invested in an active global equities fund is currently 0.14%, that has more than doubled from the 0.06% additional charges rate of 10 years ago.

What is included in additional expenses varies between different asset classes (but typically covers the cost for custody), fund administration and depositary services, fund administration, fund audit, and the legal and regulatory costs of the fund itself.

Why are we seeing this increase in additional expenses?

There’s no doubt the regulatory burden for all types of funds has been increasing and this will raise costs. There has also been a general trend for investment managers to outsource investment management functions that they previously did in-house. Some accounting functions, arranging cash movements to settle trades, FX hedging and other non-core functions are increasingly being carried out third-party firms. These firms, in many cases, are the big players in providing custody, fund administration – firms such as Bank of New York and State Street.

These outsourced functions are paid by the investment manager, but it does raise the question of whether there is some cross-subsidising. Are fund service firms raising the charges for services they provide to funds – paid by investors directly – to be able to offer cheaper outsourcing services to investment managers, savings which the investment managers have, in part, passed on to investors in lower management fees?

Longer-term trends: active fee rates are falling

According to our data, management fee rates for most active strategies have fallen over 10 years.

Over the last 10 to 15 years, the investment management industry globally has changed dramatically. The popularity of passive investment strategies has grown hugely, taking assets away from the traditional actively managed products. In particular, active managers of listed equities have responded by reducing fees to try to attract assets.

In 2024, Morningstar reported that for US funds across all asset classes, assets of passively managed funds were for the first time greater than assets of actively managed funds. In Europe, active investing is still larger than passive, but here too the trend is for an increasing share to be passively managed.

How are investment managers reacting?

Market pressures

The pressure on active fees and the lower demand for actively managed products – especially for equities – has for many years led to investment managers seeking greater scale through mergers.

This has taken on a new form since our last survey as managers that previously worked largely in listed, liquid markets seek mergers with private asset managers.

Strategic responses

Private assets attract higher fee rates in general than liquid, listed assets. In a drive to improve revenue and profitability, large, traditional investment managers have been buying-up private market managers. A number of traditional asset managers have all purchased firms or announced strategic tie-ups with private asset managers, evidencing the growing interest in the private markets sector and the opportunities some managers see.

Above is a summary of some private market strategic activity by traditional managers we’ve seen in the last few years.

Why private assets?

Whether this move into private assets will help these firms increase profitability, while offering investors better value products and easier access to private markets, remains to be seen.

Private markets have been very profitable for the small boutique investment management firms. Returns for investors have, over long-term periods, been strong too. In private equity, for example, McKinsey’s 2025 report on the asset class finds that average returns for funds raised between 2000–2021 have outperformed public equity markets over 5, 10 and 25-year periods.

Risks and open questions

However, rewarding and retaining this talent inside a larger organisation is likely to be a challenge that large, multi-asset firms have historically struggled to get right.

Transaction costs

Of all the types of investors’ costs, some of the least quoted are those incurred when trading within the fund or portfolio. Transaction costs are additional costs on top of the more widely quoted AMC and OCF.

The manager may trade actively – repositioning the portfolio – or may trade passively to buy and sell the whole portfolio pro-rata to invest new subscriptions or divest to meet redemptions. In a pooled fund, there is often some form of anti-dilution measure – a levy or price adjustment on investors entering or leaving the fund – so that resulting transaction costs are borne by them alone and not by existing investors. In theory then, the net transactions costs are all at the discretion of the manager and are an additional cost for actively managing the portfolio – which is, hopefully, more than offset by the extra returns from this active management.

The chart shows the median, upper and lower quartile transaction costs for key asset classes.

Transaction costs vary materially by asset class, depending on the liquidity and nature of the underlying assets as well as the level of turnover within the portfolio, often closely linked with how actively managed a fund is.

Unsurprisingly, we observe lower levels of transaction costs for funds that are passively managed and those that hold more liquid underlying assets.

In the chart, we show the median transaction costs as a proportion of the median AMC to highlight how transaction costs, in some cases, can make up a significant proportion of the overall costs (for our £50m investment).

Across the funds surveyed, transactions added an extra cost equivalent up to 80% of the AMC, asset-backed securities and active global corporate bonds being particularly notable asset classes with high ratios.

The high ratio for passive UK equities is simply explained by the very low AMC to begin with.

For asset classes with high ratios, investors should be aware that transactions costs can be a significant contributor to the overall cost.

Our data also suggests that the range of transactions costs for asset-backed securities between different managers is quite wide; investors should be taking these extra costs into account when selecting and monitoring managers.

The regulations on what can legitimately go into these transactions costs has changed over time. The FCA amended the rules so that from 2025 investment managers can pay for research from trading commissions. This reversed rules that effectively took away that option in 2018.

We responded to the FCA’s consultation on this recent change in strong terms to say we did not think this was in the interests of investors. The FCA’s own independent Financial Services Consumer Panel also opposed the change.

We think that research into economies, markets, companies and securities is the role of the investment manager, and investors expect that cost to be paid for by the fee they pay to the investment manager: either the agreed segregated account fee or from the AMC of the fund. Research should not be an extra cost borne by investors and paid for in an opaque way.

We haven’t yet seen any manager take-up this new option to pay for research through trading commissions. When we do (being too much of a realist to say “if we do…”), we will be pushing hard for a reduction in the AMC to offset this extra cost. A cost that, in our view, should be paid by the investment manager.

The zero-fee investment fund

We’ve seen recently the launch of zero-fee index-tracking funds. On the face of it, these look very appealing – no fees with minimal risk of underperforming the benchmark index – however, on closer analysis there is often a tax drag, which can be much bigger than any fees saved.

Unlike traditional index-tracking funds, these zero-fee products often utilise swap contracts so there is no tracking error from holding a slightly different portfolio than the index.

Each product varies considerably, but the majority we see track a variant of a market-cap index that has a somewhat lower return than the version more commonly used by institutional investors. The difference is due to the way a tax payment is treated.

When an overseas company pays a dividend, the country where it’s located may retain a portion of the dividend as a tax – a so-called withholding tax. Depending on the investor type, and which country the dividend comes from, you may be able to reclaim some or all of that tax – individuals, charities and pension schemes can usually claim back different amounts.

Most index providers publish indices for both the return net of tax – assuming the full rate is paid to the tax authorities; and the return gross of the tax – assuming 100% of the tax can be reclaimed. At least one provider also calculates the return applying the tax rates applicable to UK pension funds. This “UK pension” fund return is far closer to the higher, gross return than the net.

The withholding tax position for individual investors and charities is a little different and not quite as beneficial as that for pension schemes. However, index tracking funds for individual investors and charities can still usually achieve better returns than the net index.

Most of the zero-fee products we’ve seen seek to track the lower, net of tax, index return. Some offer a premium above that level, but the expected return is often still below the return that a pension scheme should be able to achieve if it invested in a tax-efficient index-tracking fund.

The “should” in that last sentence is doing a lot of heavy lifting, of course. There will be some tracking-error, failed tax reclaims and other costs in the index-tracking fund that you need to take into account to make a fair comparison.

Over last 10 years, the gross index has consistently outperformed the net index by around 0.5% pa. Over 10 years, that could make around a 5% difference to the overall size of an investment pot.

A pooled index-tracking fund for UK pension schemes should get a return, before fees, far closer to the gross index than the net.

Most zero-fee index-tracking products we have seen use the net index as a reference and are likely to underperform a tax efficient index-tracking fund for pension scheme investors.

LDI

Since our last survey, UK gilt markets and LDI investments have been shaken by the fallout from the ‘mini-budget’ in September 2022. As a result, UK gilt yields have risen materially. For example, the 20-year gilt yield has increased from 1.2% at the end of 2021 to 5.3% at the end of 2025. Yields for European government bonds have also risen and Euro-denominated investors have seen a similar, if less dramatic, effect.

The asset values of longer-dated gilts and LDI portfolios have fallen materially in response to these yield rises. The UK Pension Regulator (TPR) estimates the LDI market has more than halved from £1.5 trillion in 2021 to about £0.7 trillion as at March 2025.

The average UK pension scheme now has improved funding levels and is hedging a higher proportion of its interest and inflation risks. Together with new regulations this has contributed to making segregated LDI relatively more attractive than pooled LDI for many schemes.

LDI portfolios come in two categories: pooled and segregated. Both serve similar purposes but are operationally set up differently and have their respective advantages and disadvantages.

Dynamic LDI annual fee rates down

0.09% (£45k)
Passive LDI annual fee rates down

0.02% (£10k)

Comparing fees for pooled and segregated LDI mandates is not exactly comparing apples to apples, as fees are usually levied on different measures. We typically see pooled LDI fees levied on the value of the fund and segregated LDI fees levied on the value of the liabilities being hedged. This is an important distinction, as the value of a LDI fund is smaller than the value of liabilities being hedged, due to leverage.

Even comparing pooled fund LDI fee rates from 2022 to today is not straightforward. On a somewhat naïve comparison, we find a reduction in AMCs for both dynamic and passive LDI funds.

But this isn’t a completely valid comparison.

Most LDI investors will be targeting an amount of hedging for the LDI fund to provide. Since the 2022 mini-budget, leverage levels in LDI funds have reduced – which means investors need to put more money in to keep the same level of hedging.

Adjusting for the leverage change before and after the mini-budget to maintain the same level of exposure, we find that that for an investment into a Dynamic LDI pooled fund, the equivalent annual fee has risen, by about 0.03% (£15k).

Adjusting for the lower sensitivity to interest rate changes, fee rates have gone up slightly from 2022 to 2026.

Private markets fees

We have seen a growing appetite for private market assets from a variety of investor types, seeking illiquidity premium and accessing markets beyond the public sphere. Similarly, managers have been focusing on private markets and launching products and funds.

Our analysis across these type of funds reveal that there is some evidence that the performance the manager needs to achieve before a performance fee is paid – the hurdle rate - has decreased, to the detriment of investors. This may be offset by a general reduction in the performance fee rate; what once was a standard 20%, appears to be coming down. Overall changes to performance fees can be nuanced, and it is important to consider these finer details when considering an investment in private market assets.

Private market fees are complicated!

It sounds simple: there’s a flat-rate management fee and a performance fee. There are some differences in the terminology: the management fee is broadly equivalent to the AMC, but with some important differences; and the performance fee is often called the carried interest or carry.

But from there on we need to look at the small print. There is little consistency across funds for how fees and costs on many private market funds work. Most private market funds are of limited life – an investor commits to invest an amount of money, that commitment is drawn down and invested by the investment manager, and eventually the investment proceeds are returned.

To give you a flavour of the issues, here are some differences between private market funds:

The management fee can be based on the amount committed, on the amount invested or the value of the fund.
The performance fee can be paid based on the performance of the fund as a whole, or initial payments can be based on the performance of each asset separately, with a true-up at end of the fund’s life. This can cause a significant difference in the timing of the fee paid – and may only be indicated by the change of a single word in performance fee jargon: either “American” or “European” waterfall.
Other costs can include some of the staff costs of the investment manager. Yes! These staff costs can be paid by the investors – from the fund assets – and not by the investment manager from the usually generous management fee.

LCP has lots of experience in the fee and commercial terms for private market assets. Please do get in touch with us for assistance on understanding and negotiating terms with managers.

How has the aggregate DB fee rate changed?

Drawing on fee data from previous LCP surveys and asset allocation data from the Pension Protection Fund’s (PPF) Purple Book, we’ve crunched the numbers to see how investment manager fees have developed over time for UK DB pension schemes.

We estimate* that for a typical £500m pension scheme, the aggregate fee rate being paid has fallen fairly steadily from 0.41% in 2017 to 0.34% in 2025. This is equivalent to a saving of £350k per annum, all else being equal.

What’s driving this is down to a combination of changing asset allocations and changes to fee rates across the underlying asset classes. The biggest impact is the reduction in equity allocations, which has nearly halved since 2017, and a subsequent increasing allocation to cheaper LDI bond type mandates. This developing asset mix has been a long-term theme as pension schemes de-risk with improving funding positions.

This period has also seen a broader fall in total UK DB assets from £1.5 trillion to £1.1 trillion. From the point of view of the UK investment management industry, there has been a fall in fee revenue of around 40% since 2017.

*We had to make some assumptions around the mix of assets. In particular, splitting the allocation to ‘bonds’ between corporate bonds and LDI, and historic allocations across alternative assets.

Allocations adjusted from PPF Purple Book report, as at 2024, 2022, 2019 and 2017.

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Glossary

: Annual management charge. The core fee charged for the ongoing management of a fund.

: Expected ongoing costs included in the OCF, not including the AMC.

: A charge or price adjustment paid by subscribing and redeeming investors in a fund to cover the costs of transactions related to their subscription/redemption.

: The process by which LPs’ commitments are called by GPs and LPs are required to pay the called amount to the GP within the given timeframe

: A provision in some private market funds whereby LPs are able to reclaim previously paid performance fees due to underperformance in latter periods.

: General Partner. The name given to the private equity/credit/infrastructure firm that is responsible for managing the fund.

: the rate which the GP must exceed in order to accrue performance fees.

: Internal rate of return. A compounded rate of return commonly used for private market funds, taking into account cashflows and the value of underlying assets.

: Liability-driven investment. Term used to describe assets or funds whose purpose is to match the movements in the investor’s liabilities, often involving a mixture of assets and the use of leverage.

: Limited Partner. The name given to the investors of a private equity/credit/infrastructure fund.

: Ongoing charges figure. Represents a measure of the total ongoing costs of running a fund, including the core AMC and any other expenses associated with running a fund.

: One-off costs or costs that are variable year-to-year. Performance fees and transactions are examples.

: Pension Protection Fund.

: total expense ratio. Interchangeable term for OCF.

: The Pensions Regulator.

: The term used to describe the order in which AMC and performance fees are levied on distributions from private market funds.

Read the previous edition

For the past decade, we've seen a downtrend in investment management fees for institutional investors across most core asset classes. In our report, we find signs of that trend levelling off, with notable exceptions in private markets assets.