Posted inAbsolute ReturnAlternatives

Fund selectors, wake up and negotiate your fees!

The finding that costs are a secondary factor in fund selection trumps a gut feeling that the level of fees one is paying is especially important for funds which target absolute returns and focus on capital preservation. Alternative Ucits funds, which often target a Libor+ something annual return, usually fit in this category: the higher their fees, the less likely these funds will achieve such a target. So what could be the root cause of the relative complacency on fees?

Will MiFID bring change?

Kemp (pictured right) points out that assets in multi-strategy funds, the most popular alternative Ucits category this year in terms of fund flows, are extremely concentrated, and competition is limited. “Many investors are looking for a one-stop-shop absolute return solution, and there are very few funds with an established track record in this area,” he says.  

However, Kemp believes that the implementation of MiFID II will make fee negotiating more common place, since the introduction of clean share classes and the abolishment of distribution fees makes it much more straightforward to compare the cost component of different funds. “So in a European context, there seems plenty more room for fee negotiation.”

Part of the Bonhill Group.