US fund management industry is far more profitable than that of the Europe, despite charging most investors less fees, according to report published Fitch Ratings.
The 24 major listed European asset managers which Fitch analysed reported median operating profits of just 10.3 basis points of assets under management in the first half of 2013. However, in the US, listed managers generated median earnings of 13.3 basis points, despite having a marginally higher cost/income ratio.
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Yet headline fees are typically far higher in Europe, according to research by the European Fund and Asset Management Association in 2011. The average total expense ratio for a European equity fund aimed at retail investors came in at 175 basis points of assets per year, compared to 95 basis points in the US.
Europe has about 5 trillion of insurance assets, compared with just 3 trillion in pension funds, which are charged the full fees, according to Fitch report.
Aymeric Poizot, managing director of Fitch’s fund and asset manager rating group, said the apparent anomaly stemmed from the preponderance of sweetheart deals insurance company-owned European asset managers cut for their parent companies, which typically pay fees of just 10bp, compared with the 20-30bp third-party institutional investors have to pay for the same service.
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By GlobalData
