The cost of buying and selling shares and other securities adds an extra 50% to the base fees charged by fund managers, according to a new study that claims to be one of the most detailed ever completed on the subject. Transaction costs, which are typically not included in managers’ fees but taken out of a fund to pay brokers before returns are paid to investors, have become a subject of controversy in recent years, with campaigners railing against “hidden fees”. ...
Institutional dealing costs are "clearly material", according to one of the most comprehensive reports ever completed on the matter. The study, conducted by CEM Benchmarking, found these “hidden fees” amounted to 20bps. A detailed breakdown revealed that relatively high allocations to private assets contributed to the high number, with equities and bond trades incurring average costs of 6bps and 22bps respectively. Greater transparency, prompted by voluntary standards produced by an FCA working group in recent years, has made obtaining the data easier; the market now needs to determine whether they are reasonable, according to John Simmonds, UK principal at CEM.