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The results of the CIO Sentiment Survey broken down into investment impact and themes
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There is significant dispersion among respondents about the trajectory of investment costs, which appears to come down to the specific approach and circumstances of individual funds more than an underlying industry trend. The data found 38 per cent saying investment costs have increased by either 1-5bps or 6+ bps, and 35 per cent saying they have decreased by either 1-5bps or by 6+ bps.
While this finding does not itself point to a clear direction in the overall movement of investment costs, when compared to previous years there are fewer respondents managing to get costs down, and greater numbers seeing costs increase.
“There were fewer respondents managing to get costs down, and greater numbers seeing costs increase.”
Total Investment Costs in bps Relative to Assets
In bps, 2021 2023
“I would say from other surveys in the industry that the trajectory of a slight uptick in costs is consistent,” Cloherty said. “People are trying to tackle costs in a couple of ways. They are trying to take traditional portfolio costs down, with more indexing, more insourced investment capabilities.
“But with all the asset shifts into private assets, the multiple in costs you are paying there is so much more extensive that the aggregate cost of investment is ticking up.”
More than half of respondents (55 per cent) are renegotiating fees on strategies where they have leverage or sizeable assets, and the same proportion are conducting in-depth reviews of fees paid. A third of respondents are renegotiating fees on underperforming strategies.
When asked about these findings, CalSTRS’ Ailman joked that Wall Street has a long history of developing new products, and new products are always expensive.
“I’m still very focused on lowering costs and doing so more efficiently,” Ailman said. “I can’t explain that trend on why we would be seeing costs rise other than the shift from public market securities into private market securities which are inherently more expensive.”
How Have Your Investment Costs Changed in the Last 3 Years?
% of respondents
key:
2024 CIO SENTIMENT SURVEY