Fee Pressure is Easing for Asset Managers in Europe’s Insurance Arena
March 17, 2023 — London
It has not disappeared but there are ways to alleviate it
Fee pressure for asset managers operating in the European general account insurance market is easing, according to the latest Cerulli Edge―Europe Edition. Only 10% of asset managers see decreasing fees as a significant obstacle to growing their business, compared to 42% in the previous year.“High fee pressure is less of a problem than it has been in the past. For example, in the UK, only 5% of asset managers reported high fee pressure, down from 25% the previous year. In Switzerland it was 7%, down from 21%,” says Justina Deveikyte, director, institutional asset management research.
Manager respondents in the 10 European markets covered by Cerulli’s reported zero expectation of significant increases to fee pressure over the coming 12 to 24 months.
The research also indicates that fee pressure in the French insurance asset management industry has started to decline: in 2022, 41% reported facing either very high or high fee pressure from insurers in France, compared to 50% in 2021.
“Asset managers in Italy face slightly lower fee pressure than those in other insurance markets, mainly because Italian insurers typically outsource only niche asset classes where prices are already higher; in addition, they tend to choose fund vehicles instead of mandates,” notes Deveikyte.
In terms of asset classes, emerging market equity and direct lending/senior debt look set to enjoy the most relief when it comes fee pressure, with no manager respondents expecting a significant increase in fee pressure and fewer than half expecting a slight increase.
Fee pressure does, however, remain a challenge for asset managers working with European general account insurers in some markets. According to the research, fee pressure is most intense in Denmark, Sweden, and the Netherlands. By contrast, in the UK, the number of respondents experiencing very high fee pressure fell from 25% in 2021 to 5% last year; in Germany the number dropped from 13% to 0%.
“Fees are linked to what asset managers are offering: in private markets, for example, the complexity and sophistication of the products provide space for higher fees,” says Deveikyte. “Asset managers should look to alleviate fee pressure by focusing on asset classes that offer higher-margin business. Alternatives, private assets, emerging market equity, and, to some extent, emerging market debt are still able to command higher fees due to the sophistication of the products involved.”
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