Managed investment fees drop

Fees for retail managed investment products dropped by six per cent in the five year period from 1996 to 2000, a report released by the Investment and Financial Services Association (IFSA) has revealed.

IFSAchief executive officer Lynn Ralph says the drop in fees can partially be attributed to an increase in industry competition, although it has been difficult for IFSA to ascertain exactly why fees have dipped since 1996.

“Basically what we looked at for this research were prospectuses in relations to Management Expense Ratios (MERs). There is really no other publicly available data available,” Ralph says.

“We tried to get some attribution, with the MER, but it is virtually impossible. There were a variety of drivers that would have driven MERs down such as competition, however, the introduction of GST and the Managed Investment Act drove it back up,” she says.

The report also found that investors have derived significant benefits from regulatory reform, with the industry passing on annualised cost savings of $26 million following the introduction of the Managed Investment Act amendments in July 1998.

It is also understood that information about whether the drop in fees has had any effect on fees outside funds management was not conclusive.

Ralph says due to privately held data, the report could not look into the front end investor deal between investors and financial planners, or the amount of trail charged.

IFSA commissionedKPMGto undertake the research of the report. In the report, managed investment products were defined as registered managed investment schemes excluding cash management trusts.