2014 Investment Management Fee Survey: U.S. Institutional Fund Sponsors and Investment Managers

CALLAN
INVESTMENTS
INSTITUTE
Survey
2014 Investment Management

Fee Survey
U.S. Institutional Fund Sponsors and Investment Managers
Table of Contents
Knowledge. Experience. Integrity.
Executive Summary
Respondent Group Profile
Total Fund Level Fees
Fee Revenues
Performance-Based Fees
11
Investment Manager Published Fee Reviews and Alterations
17
Fund Sponsor Fee Reviews
19
Fee Negotiations
20
Published Versus Actual Fees by Asset Class
25
Future Manager and Product Changes
43
Perception of Value-Added Justifying Fees
45
Top Fee Concerns
46
Appendix I: 2013 Published Fees for Additional Asset Classes
47
Appendix II: 2011 Published and Actual Fees by Asset Class
49
2014 Investment Management Fee Survey
Executive Summary
Callans 2014 Investment Management Fee Survey provides a current report on institutional investment management fee
payment practices and trends. To collect this information, Callan sent an electronic questionnaire to a broad sample of U.S.based institutional fund sponsors and investment management organizations. Respondents provided fee information for calendar year 2013 (specific dates varied by organization, but the majority were as of December 31, 2013), and perspective on
fee practices and perspectives for 2014. We supplemented this data with information from Callans proprietary databases to
establish the trends observed in this report.
Callan conducted similar surveys in 2004, 2006, 2009, and 2011. We offer commentary regarding differences, where relevant,
between historical survey results and the 2014 findings, along with observations reflecting both long- and short-term trends.
Seventy-two fund sponsors representing $859 billion in assets, and 211 investment management organizations with $15 trillion in assets under management, provided detailed fee practices and data on 15 asset classes. Results were supplemented
by actual and published fee information sourced from Callans fund sponsor and investment manager databases, as well as
other industry sources.
Key Findings
Investment management fees represent 46 basis points (bps), on average, of fund sponsors total assets, up from 37 bps in
2009. The difference between the median and average has climbed over this time period. Other data in Callans fee survey
100 bps
also reveals a divergence between the funds that pay the most and those that pay the least in investment management fees.
The range between funds that paid the most (10th percentile) and those that paid the least (90th percentile) increased dra-
80 bps
matically: from 56 bps in 2009 to 73 bps in 2013. Differences in investment policy, and notably asset allocation, can lead to
60 bps
substantial disparity in fees. While some funds are increasingly looking to low-cost, public market index strategies, others are
investing a greater portion of their portfolio in high-cost alternative assets. Other key survey findings include:
40 bps
Alternatives, which are consistently the most expensive asset class, are facing fee compression: the median total
20 bps
0 bps
asset class fee declined from 134 bps in 2009 to 99 bps in 2013, and the 90th percentile fell from 174 bps to 152
2009
2011
2013
10th Percentile
25th Percentile
Median
75th Percentile
90th Percentile
72.0
48.7
30.9
22.3
15.5
S ee pag e72.1
6.
52.6
36.8
27.7
14.0
84.0
53.5
31.7
26.5
10.6
Average
# of Observations
37.1
55
44.6
58
46.4
64
bps. Large allocations to alternatives can greatly increase overall investment management fees. Correlations
between percentage of total portfolio allocated to alternatives and fees paid (in bps) were strong in 2013 (+0.70).
Executive Summary (continued)

Total U.S. and non-U.S. equity fees paid increased marginally from 2009 to 2011, but declined from 2011 to 2013. Median
80 bps
U.S. equity fees run about 60% of their non-U.S. counterparts. Non-U.S. fees are typically higher in part due to research
Corporate
expenses. Fixed income median expenses were flat from 2009 to 2013.
60 bps
By fund type, endowments and foundations paid more than twice as much (median 73 bps) for investment management
Public
40 bps
fees as public and corporate funds (34 and 32 bps, respectively). The endowments and foundations in our survey have the
Endowments/Foundations
largest allocation to alternatives, and were also smaller funds, which tend to pay more than large funds.
20 bps
Over the past two years, published fee schedules changed very little across the publicly traded asset classes examined in
0 bps
2009
2011
2013
this report. Investment managers review published fee schedules frequently, but rarely change them. For public equities,
actual fees generally increased for larger accounts (greater than $75 million) and were flat or declined for smaller accounts.
Se
ep
In real estate, published and actual core open-ended commingled fund fees saw increases in the 1 to 9 bps range relative to
a ge 7
.
2011. Value-added fees grew more substantially (10 to 15 bps), while fees for REITs were relatively flat. Conversely, private
Annually 3%
More than every
five years 4%
Between two and
five years 5%
Other 5%
60 bps
equity (separate accounts and fund-of-funds) and hedge fund-of-funds fees declined over the last few years.
Fund sponsor fee reviews have increased in frequency relative to 2011. Close to half (45%) of fund sponsors review fees
annually, up from 34% in 2011. An additional 16% review fees more than annually (versus 11% in 2011).
Never 6%
40 bps
When a new fund/product
is established 10%
20 bps
Small (<$500mm)
While investment managers are confident in the value-added they provide, fund sponsors top concern regarding fees is
As needed
67%
whether or not active managers are providing the value-added to justify the fees.
Medium ($500mm - $5bn)
Investment managers reported a decline in the percentage of revenues that cover base costs for strategy management
Large (>$5bn)
while a greater percentage of fee revenues are allocated to firms profit margins and bonuses. On average, investment
managers allocate 42% of fee revenues to cover the costs of managing the product, including base compensation, down
0 bps
2009
Se e p
a ge 18.
2013
2011
to levels recorded in 2009. In 2013, profit represented 34% of fee revenue, on average.
80%
Fund sponsor respondents pay

As alternative asset classes become more common in institutional portfolios, so does the use of performance-based fees.
performance-based fees
60%
More fund sponsors report paying performance-based fees for at least one account in 2013 (55%) than in 2011 (35%),
Funds managers are paid

putting the figure
performance-based
fees closer to what was observed in 2009 (59%). The asset allocations of the respondent groups influence
40%
this figure, as exposure to private marketsincluding hedge funds, hedge fund-of-funds, private equity, and real estate
Mandates awarded in the past

18 months
use performanceaccounts
for much of the use in performance-based fee structures.
based fees
20%
0%
from around 50% in previous surveys. Bonuses take an average of 24% of fee revenue, up from 19% in 2011 and similar
2009
2011
See
2014
p a ge 11.
Respondent Group Profile: Fund Sponsors

Seventy-two fund sponsors representing approximately
$859 billion in assets responded to Callans 2014 Investment
By Fund Type
Management Fee Survey. Responses are supplemented by

fee data from 43 additional funds in Callans Fund Sponsor
Other 11%
Database (overlap eliminated).

The majority of fund sponsor respondents are public defined
benefit plans (41%). Corporate defined benefit plans make
Endowment/
Foundation
14%
Public 41%
up about one-third of respondents (34%), and 14% are

endowments/foundations. Other fund types (11%) include
operating and insurance guarantee funds and various notfor-profit trusts.
Corporate 34%
We divide respondent funds into five groups by size:

22% of respondents have fund assets less than
$500 million
21% have assets between $500 million and $2 billion
By Assets
19% have assets between $2 and $5 billion

18% have assets between $5 and $15 billion
19% have fund assets greater than $15 billion
> $15 bn 19%
< $500 mm
22%
The fund sponsor respondent group is skewed toward larger

funds when compared to the U.S. fund sponsor marketplace
as a whole, as represented by Standard & Poors Money
Market Directories 2014 Database, where around 77% of
$5.1 to
$15 bn
18%
funds have less than $1 billion in assets. The majority of

these funds assets are actively managed (75% average).
While several funds manage a sizable portion of their assets
$500.1 mm
to $2 bn
21%
$2.1 to $5 bn
19%
internally, on average 95% of assets are managed externally.
Note: Throughout this survey, charts may not sum to 100% due to rounding.
Respondent Group Profile: Investment Managers

Asset Class Distribution
Survey results incorporate responses from 211 investment

management organizations, supplemented by Callans
Investment Manager Database of more than 1,500 firms.
By Firm Type
The majority of respondents identified themselves as
Bank/Trust 3%
investment managers (75%) and 17% indicated they are
Other 5%
registered investment advisors. Firms classified as other

include LLCs and other types of corporations.
($15 trillion in combined assets)

100%
90%
RIA 17%
80%
Respondents are diversified by size based on total assets

under management as of December 31, 2013. Thirty-five
Investment
Manager
75%
percent manage less than $5 billion while 30% manage

between $5.1 and $30 billion. The remaining 35% manage
greater than $30 billion in assets.
respondent assets under management. U.S. equity styles

comprise 17%, non-U.S. and global equities another 16%,
By Assets Under Management
liquidity, multi-assets, outsourced CIO, futures and options,
30%
> $100 bn
18%
currency, and other various strategies.

$30.1 to
$100 bn
17%
$10.1 to $30 bn
17%
40%
(as of 12/31/13)
and alternatives (including real estate) 9%. Other includes

asset liability management, beta overlay management,
60%
50%
Nearly all of respondent assets (96%) are actively managed.

Fixed income assets make up close to half of total manager
70%
< $1 bn 8%
$1 to $3 bn
16%
$3.1 to
$5 bn
11%
20%
10%
0%
Large Cap 11.7%

Mid Cap 2.2%
Small Cap 2.3%
Other U.S. Equity 0.7%
Non-U.S. Equity 7.1%
Global Equity 5.6%
Emerging Markets 3.3%
Real Estate/REITs 3.5%
Private Equity 1.5%
Hedge Funds 1.5%
Hedge Fund-of-Funds 0.8%
Commodity Funds 0.4%
Infrastructure 0.3%
Absolute Return 1.5%
Balanced 5.7%
Core Fixed 9.6%
Core Plus 6.0%
Other U.S. Fixed 9.2%
High Yield 3.4%
Non-U.S. Fixed 5.3%
Money Market 9.4%
Other 9.1%
$5.1 to $10 bn
13%
Total Fund Level Fees

At what point(s) are market values
calculated upon which your fees
are based?*
The bar charts represent overall investment management

fees as a percent of total fund assets for three separate calendar years. Fund sponsors paid a median 32 basis points
Investment Management Fees

Across Total Fund (bps)
in investment management fees in 2013, representing a

marginal increase relative to 2009 (3%). The range of fees
100 bps
80 bps
between the funds that pay the most and those that pay the
least in management fees.
average has climbed. The range between funds that paid

the most (10th percentile) and those that paid the least (90th
percentile) was 56 bps in 2009 and rose to 73 bps in 2013.
Average fees paid increased from 37 bps to 46 bps.
ment policy, and notably asset allocation. Large allocations to alternatives, which are the most costly, can
greatly increase overall investment management fees.
Correlations between percentage of total portfolio allocated
to alternatives and fees paid (in bps) were strong at 0.70
in 2013, 0.64 in 2011, and 0.56 in 2009. Alternatives are
32%
18%
Month end
40 bps
dramatically and the difference between the median and
These statistics point to larger differences in invest-
Varies by
manager
60 bps
Over the same time period, the range of fees paid increased
47%
Quarter end
is notably wide, highlighting a larger trend of divergence
20 bps
Other
0 bps
Quarter
beginning
2009
2011
2013
10th Percentile
25th Percentile
Median
75th Percentile
90th Percentile
72.0
48.7
30.9
22.3
15.5
72.1
52.6
36.8
27.7
14.0
84.0
53.5
31.7
26.5
10.6
Average
# of Observations
37.1
55
44.6
58
46.4
64
12%
6%
also more likely to utilize performance-based fee arrangements, which led to lower fees for some investors in 2009
after many strategies suffered poor performance in 2008.
Consistent with Callans previous fee surveys, investment
management fees are most frequently calculated on a quarterly basis; 47% of fund sponsors use quarter-end asset market values as the base for fee calculations.
Correlations: Investment Management Fees

Paid (bps across total fund) and Percentage
Allocated to Alternatives
2009
2011
2013
0.58
0.64
0.70
*Multiple responses allowed.
Fees by Fund Type and Size

We examine median investment management fees paid as a
percentage of total fund size by fund type and size over time.
Endowments/foundations have consistently paid the most in
management fees at 52 bps in 2009, 77 bps in 2011, and 73
bps in 2013. Higher fees are a result of two factors: larger
allocations to more-expensive alternative asset classes,
and fund size, as many of the endowments/foundations that
responded to this survey have less than $500 million in total
fund assets. We observe in the chart below that fund size
Median Total Investment Management Fees Paid (by fund type)

80 bps
Corporate
60 bps
Public
40 bps
Endowments/Foundations
20 bps
0 bps
also influences total investment management fees paid.
2009
2011
2013
Public funds have paid slightly more than corporate funds

over time, though the gap shrank in 2013 to just two bps.
Smaller funds pay a premium for investment management
relative to other fund sizes: funds with less than $500 million
in assets paid 30% more than medium funds ($500 million to
$5 billion in assets) and 60% more than large funds (greater
than $5 billion in assets). The largest funds enjoy price breaks
for investing more money in individual mandates, as we reveal
later in the survey when we examine fees by asset class.
Median Total Investment Management Fees Paid (by fund size)

60 bps
Small (<$500mm)
40 bps
Medium ($500mm - $5bn)
20 bps
0 bps
Large (>$5bn)
2009
2011
2013
Actual Fees Paid Over Time

We first look at actual investment management fees paid
as a percent of individual asset classes over time to reveal
Median Actual Fees by Asset Class (basis points as a percent of total asset class value)
longer-term trends. The chart reveals median total fees paid

by asset class as reported by the fund sponsor respondents
to the 2014 questionnaire. The table below reveals addi-
U.S. Equity
Non-U.S./Global Equity
Fixed Income
Alternatives
150 bps
tional data, including the range of fees from 10th to 90th

percentile. The size of the allocation to an asset class, as
well as that asset classs fee levels, influence the amount of
fees paid relative to total fund assets.
100 bps
Alternatives (including real estate, hedge funds, private

equity, and other asset classes) are consistently the most
expensive asset class, at an average of around 120 basis
50 bps
points (bps) over the time periods examined. This asset

class also reveals the widest range from the 10th to 90th
percentile over time at around 100 to 160 bps. While the
median declined substantially from 134 bps in 2009 to 99
0 bps
bps in 2011, the average held steady at around 120 bps.
2009
U.S. and non-U.S. equity median and average fees followed
2011
Non-U.S./Global
Equity
U.S. Equity
a similar pattern over time, increasing marginally in 2011 but
2013
Fixed Income
Alternatives
2009
2011
2013
2009
2011
2013
2009
2011
2013
2009
2011
2013
10th percentile
43
65
57
80
84
72
43
36
49
174
205
152
25th percentile
35
46
38
54
61
58
27
28
28
149
151
140
Median
24
29
22
41
45
37
18
20
20
134
96
99
75th percentile
16
15
15
28
32
28
11
11
13
85
75
80
90th percentile
19
20
14
51
42
49
Fixed income median expenses were flat over the time
Average
28
35
31
43
49
42
25
21
25
121
122
119
period examined. This asset class has the narrowest range
# of observations
44
50
57
38
44
54
43
49
54
28
32
41
declining in 2013. Median U.S. equity fees run about 60%

of their non-U.S. counterparts. Non-U.S. fees are typically
higher in part due to research expenses, which can be more
extensive particularly in frontier and emerging markets and
other less-covered areas.
between 10th and 90th percentile, around 30 to 40 bps over

the time periods examined.
Fee Revenue Generation and Profitability: Investment Managers

Callan asked investment managers about their change in
year-over-year fee revenue for a five-year period. The average results are shown alongside historical data from our
previous surveys.
Changes in investment management fee revenue growth
peaked in 2006 between 21%30%, on average, and then
dove with the 2008 market crisis. Fee revenue growth recovered in 2010 to 11%20%, and then tapered off at 1%10%.
Calendar Year Revenue Firm Profitability (Investment Manager Average Response)

How has your firms investment management fee revenue changed from the previous calendar year?
21% to 30%
11% to 20%
1% to 10%
0%
Managers estimate this level will be sustained through the
02
end of 2014.
New cash flow declined slightly (by 10%) after plateauing at
21%30% from 2005 to 2007, and has reached a new norm
at 11%20%. Managers expect new cash flow will contribute the same amount to fee revenue growth in 2014 as it
has for the past six years.
Average investment manager pre-tax profit margins have
shifted between 11%20% and 21%30% over the past 12
03
04
05
06
07
08
09
10
11
12
13
14E
What do you estimate is the percentage change in fee revenue generated from new cash flow (either
existing or new accounts), as opposed to fee increases due to performance?
21% to 30%
11% to 20%
1% to 10%
0%
years. In recent years, pre-tax profit margins settled in at
02
11%20%, and manager respondents project an uptick to
03
04
05
06
07
08
09
10
11
12
13
14E
11
12
13 14E
the 21%30% range for 2014.
What were your pre-tax profit margins each calendar year?

21% to 30%
11% to 20%
1% to 10%
0%
02
03
04
05
06
07
08
09
10
Fee Revenue Allocation

Investment managers appear to be leaner operations,
reporting a decline in base costs for strategy management
How are fee revenues allocated?A
as a percentage of revenues. A greater percentage of fee

revenues are allocated to firms profit margins and bonuses
as base costs have declined. On average, investment managers allocate 42% of fee revenues to cover the costs of
managing the product, including base compensation, down
from around 50% in previous surveys.
+
+
Break-even Base to Cover Costs

Bonus to Manager/Team
Profit Margin to Firm
Total Firm Revenue
U.S. Large Cap Equity

U.S. Mid Cap Equity
Bonuses are an important component of total compensation and coststhe majority (84%) of respondent firms pay
U.S. Small Cap Equity
a bonus to the individual or team responsible for managing
Non-U.S. Equity
the product. Across asset classes, an average of 24% of fee
Global Equity
revenue is allocated to pay bonuses, up from 19% in 2011

and back to levels recorded in 2009.
Emerging Market Equity
The final portion of fee revenue flows back to the investment
Core Fixed Income
management firm as profit. Across asset classes, this rep-
Core Plus Fixed Income
resents 34% of fee revenue, on average, which flows to the
High Yield Fixed Income
bottom line, up marginally from 31% in 2011.
Non-U.S. Fixed Income
41%
39%
42%
36%
45%
41%
35%
0%
A
B
24
38%
32
18%
40%
17
28%
37%
15
13
43%
12%
22%
27%
20
32%
12
27%
32%
11
35%
30%
6B
22%
49%
35%
33%
33
22%
51%
46%
36%
22%
46%
Real Estate
Hedge Funds
23%
Number of
Respondents
24%
32%
27%
33%
7B
6B
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Average responses.
Note the small number of respondents.
10
Performance-Based Fees: Usage

On this page we present average responses to questions
about performance-based fee usage amongst both fund
sponsors and investment managers. We present data collected in 2014 alongside answers to the same questions
posed in previous years Callan produced this survey.
Fund Sponsors (Average Responses)

80%
Fund sponsor respondents pay

60%
Funds managers are paid

40%
More fund sponsors report paying performance-based fees

for at least one account in 2014 (55%) than in 2011 (35%),
putting the figure closer to what was observed in 2009
(59%). The asset allocations of the respondent groups influ-
Mandates awarded in the past

18 months use performancebased fees
20%
0%
2009
2011
2014
ence this figure, as exposure to private marketsincluding

hedge funds, hedge fund-of-funds, private equity, and real
estateaccounts for much of the use in performance-based
fee structures.
The percentage of investment management firms that offer
performance-based fees increased over the time period
examined: from 64% in 2009 to 65% in 2011 and 75% this
year. However, the use of these fee arrangements declined:
17% of managers clients pay performance-based fees in
2014 compared to 32% in 2011. Further, the percentage
of managers clients asking about the availability of performance-based fees dipped from 37% to 23% over the same
time frame.
Investment Managers (Average Responses)

80%
60%
Firms clients that pay

40%
20%
0%
Investment manager respondents

that offer performance-based
fee arrangements
2009
2011
2014
New business opportunities that

have asked about the availability
of performance-based fees
11
Performance-Based Fees: Mechanics

More fund sponsors are turning to managers than custodians to value assets in accounts with performance-based
fees, a reversal of the trend observed in 2011. The majority
of fund sponsors rely on their managers exclusively (44%),
What is the source of valuation upon which performance-based fees are based?
Fund Sponsor Responses
compared to 23% in 2011. Those that look to custodians ex-
Investment Manager ResponsesA
Other 6%
clusively declined from 46% in 2011 to 35% in 2013, as did

the percentage that source valuations from both their cus-
Custodian
and Manager
15%
todian and investment manager (15% in 2013 from 23% in

2011).
In turn, investment managers rely primarily on custodians
43%
Manager
Third Party/
Administrator
Manager
44%
Custodian
35%
(64%), but additionally report using in-house valuations,
64%
Custodian
9%
Fund Sponsor
6%
Other
6%
third-party appraisals, and other sources.

Fees are most frequently based on total capital commitments
for funds that can take years to invest (e.g., real estate, private equity, etc.), although a few respondents indicate fees
How are fees handled during the start-up period?A
are based on invested capital.
Managers
The fund sponsor and investment manager
negotiate a fee schedule for the start-up period.
Performance-based fees are typically assessed over multiple years and there is no standard regarding how they are
initially handled. During the funds start-up period (before the
Fees are handled according to the published fee

schedule during the first year
(or other established measurement period).
performance measurement period has passed) managers

and fund sponsors assess fees in multiple ways. Managers
43%
7%
34%
14%
report that fees are most often negotiated in the start-up pe-
18%
Other
riod, while fund sponsors indicate that pro-rating fees is the
29%
most frequent method.

Fees are pro-rated. Until a one-, three- or five-year
track record is established, inception-to-date
results are annualized to calculate fees.
A
Fund Sponsors
10%
57%
Multiple responses were allowed.
12
Performance-Based Fees: Top Asset Classes Fund Sponsors

When asked about their usage of performance-based fees
across asset classes, alternatives topped the list. Fund sponsors cite hedge funds, private equity, and hedge fund-of-funds
For which asset classes do you most frequently have performance-based fee
arrangements?
most frequently, followed by real estate and commodity funds.
Always
Performance-based fee arrangements are the least common for core and core plus fixed income and various equity
Hedge Funds
strategies.
Private Equity
Frequently
Sometimes
55%
36%
41%
Hedge Fund-of-Funds
14%
30%
Real Estate
20%
24%
Commodity Funds
Infrastructure
9%
12%
6%
Mid Cap Equity
11%
11%
Small Cap Equity
10%
Non-U.S. Equity
8%
Other Equity
6%
Global Equity
6%
17%
6% 11%
4%
0%
14%
20%
22
15
71%
17
67%
18
67%
21
25
52%
13%
16
63%
11%
18
67%
18
56%
22%
22%
5A
73%
28%
17%
18
61%
9%
23
70%
13%
23
61%
40%
21
7A
40%
8%
19%

11%
32%
6% 11%
4%
12%
10%
14%
68%
13%
Core Fixed Income

20%
9% 5% 9%
13%
10
20%
5%
11
22
23%
57%
20%
5%
33%
14%
20%
Other Fixed Income
18%
9%
30%
24%
29%
Number of
Never Respondents
Rarely
60%
80%
100%
Percentage of Respondents
13
Performance-Based Fees: Top Asset Classes Investment Managers

Similar to fund sponsors, investment managers indicated
that the greatest percentage of their clients pay performance-based fees for alternatives, including hedge funds
Indicate the percentage of clients that pay you performance-based fees for each asset
class your firm manages.
Number of
Respondents
(75%), real estate (62%), hedge fund-of-funds (51%), and

private equity (37%). Within U.S. equities, small and mid cap
75%
Hedge Funds
strategies (6%) edged out large cap (4%).
62%
Real Estate
A very small percentage of clients pay performance-based
Hedge Fund-of-Funds
fees for core and core plus fixed income strategies (1% and
Private Equity
3%, respectively).
addition to firms that manage multiple asset classes.
5A
9%
37
6%
26
Mid Cap Equity
6%
42
Small Cap Equity
6%
54
5%
20
Balanced
5%
23
Non-U.S. Equity
4%
39
Large Cap Equity
4%
66
4%
32
3%
26
Money Market
1%
28
0%
0%
24
10%
Core Fixed Income
6A
28%
Global Equity
ment managers dedicated to one asset class or strategy in
37%
Commodity Funds
These responses reflect the survey sample, including invest-
18
51%
Absolute Return
25
11
20%
40%
60%
80%
14
Performance-Based Fees: Samples

While the previous two pages indicate that performancebased fees are more common for certain asset classes, they
Examples of Details for Performance-Based Fee Arrangements
can be used for any asset class. The table shows a sample
Core Real Estate
Multi-Strategy
Hedge Fund-of-Funds
Large Cap
1.25% 1.50%
0.75% 1.25%
0.20%
8% 10% IRR Hurdle
T-Bills
1% over Russell 1000
15% 20%
5% 10%
20%
Performance Measurement Period
3 years
1 year
1 year
Maximum Total Fee (Base + Performance Fees)
No Cap
No Cap
0.80%
of performance-based fees for three potential asset classes.

Base rates are usually a percentage of total fund assets, a
flat fee, or are expressed as a percentage (50% to 70%) of
the standard fee schedule effective rate. Minimum fees are
typically the base rate, and the usage of high-water marks
varies. Hurdle rates can be fund- and client-specific, and are
typically a predetermined performance returna benchmark
or a benchmark plus a specific return target (e.g., S&P 500 +
3%). Performance measurement periods range from one to
five years, but are most often three years.
Base Fee
Hurdle Rate
Participation Rate
Performance-based fees are usually computed based on

one-, three- or five-year returns for each account against a
benchmark, thus an underperforming year could impact fees
for several subsequent years. High-water marks are not standard for all fee arrangements, but are frequently included to
ensure managers are not compensated for strong short-term
performance amid poor long-term returns.
Commonly used terminology is defined on the following page.
15
Performance-Based Fees: Commonly Used Terminology

Base Fee: the fee earned by an investment manager in the absence of any excess return. This is also the minimum fee that
can be earned by an investment management firm.
Excess Return (Gross): the return of the portfolio (gross of fees) less the return of the benchmark or reference index.
High-Water Mark: the peak value an account has once attained and must surpass for the manager to earn the performance
fee. For any given calculation period where a manager underperforms the benchmark, a loss carry foward is accrued. The
manager must outperform the loss carry forward balance prior to earning any future performance fee.
Hurdle Rate: the minimum amount of performance return required before a performance-based fee is paid on top of the
base fee.
Maximum Fee: the highest fee that can be earned by an investment management firm.
Measurement Period: the period over which excess and net excess returns are calculated.
Net Excess Return: the gross excess return less the base fee.
Participation Rate: the percentage of gross excess return paid to the investment management firm.
Performance Fee: the participation rate multiplied by gross excess return.
Standard Fee: the fee earned by an investment management firm based upon its standard flat or tiered rate fee
schedule.
Targeted Excess Return: the gross excess return that the investment manager expects to earn on the investment strategy.
16
Investment Manager Published Fee Reviews

Relative to Callans 2011 Investment Management Fee
Survey, fewer investment managers review published fee
schedules on a regular basis: 51% revisit them at least
How often, if at all, do you review

your published fee schedules?
annually, down from 63% in 2011. Thirty-three percent of
Other 2%
When a new fund/
product is established
3%
firms look at fees as needed, up from 9% in 2011. The percentage of respondents that assess fees only when launching a new fund or product did not change much (3% in 2014
schedules more often than they change them, as detailed
on the following page.
Industry research and/

or database providers
sources. They most frequently turn to competitors (70%),

followed by industry research and/or database providers
(66%) and consultants (64%). Industry surveys (58%) and
survey respondents.
64%
58%
Industry surveys
55%
Clients
Annually
44%
As needed
33%
clients (55%) are also used by more than half of manager
66%
Consultants
Every
2-5 years
6%
Quarterly
7%
When reviewing fees, investment managers look at multiple
70%
Competitors
No published
fee schedule
6%
compared to 4% in 2011). Managers review published fee
What industry sources do you use to review

and evaluate your fees?A
38%
Industry contacts
None
3%
Other
2%
0% 10% 20% 30% 40% 50% 60% 70%
Multiple responses were allowed.
17
Investment Manager Published Fee Alterations

Two-thirds of investment management respondent firms alter
their published fee schedules on an as needed basis. Ten
How often, if at all, do you change your published fee schedules?
percent change fees only when a new fund or product is
Annually 3%
established. Only 3% report making changes annually, down
More than every

five years 4%
from 10% in 2011. Six percent never change published fee

schedules, down from 15% in 2011.
Looking at changes over time, the majority of investment
management firms report making no changes to published
fees in each year examined. When firms do make changes,
altering breakpoints and lowering fees are the most common
actions. In 2013, 14% of managers lowered fees and another
12% changed breakpoints, representing a modest uptick in
Between two and

five years 5%
Other 5%
As needed
67%
Never 6%
When a new fund/product

is established 10%
activity relative to the prior years.

For 2014, 13% of managers will lower fees, 7% will raise
account minimums, and 7% will change breakpoints. Very few
Changes to published fee schedules
firms lowered fee minimums during the time period examined.

100%
No changes
Change breakpoints
80%
Lower fee minimums

60%
Raise fee minimums

Lower account minimums
40%
Raise account minimums

20%
0%
Lower fees
Raise fees
2009
2010
2011
2012
2013
2014E
18
Fund Sponsor Frequency of Fee Reviews

Fund sponsor fee reviews have increased in frequency
relative to 2011.
How often do you typically conduct fee reviews?

Never 5%
Close to half (45%) of fund sponsors review fees annually,
Other 11%
up from 34% in 2011. An additional 16% review fees more

than annually compared to 11% in 2011. Just 5% of respon-
Every two years

11%
dents never review fees.

When reviewing fees, fund sponsors most frequently turn to
Three to five
years 13%
their consultants for information (84%). Peers (47%) and other
Twice or more
per year 16%
industry sources (11%) also provide benchmarking data.

Looking forward, 62% of fund sponsors plan to review fees
in the next year, while just 26% will not.
Annually
45%
What sources do you use for fee comparisons when reviewing and evaluating fees?A
Consultant(s)
84%
Peers
47%
11%
Various industry sourcesB

5%
None
0%
20%
40%
60%
80%
100%
Do you have a fee review planned in the next year?

Yes
No
Not sure
26%
62%
0%
A
B
20%
40%
60%
80%
12%
100%
Multiple responses allowed.

Includes CEM survey, Greenwich Associates, Pensions & Investments, Plan Sponsor, industry contacts, Bloomberg and CIEBA.
19
Fee Negotiation Practices Among Fund Sponsors

On average, fund sponsor respondents negotiated fees with
54% of their new managers and 24% of their existing man-
Fund sponsor changes in fee negotiations over time
agers, up from 42% and 14% in 2011, respectively. The 2014

averages reflect diverse responses: 46% of fund sponsors
100%
Fee negotiations did not change
successfully negotiated fees with 100% of their new managers in the past one to three years while 26% did not negotiate
Fee negotiations decreased
80%
Fee negotiations increased
with any managers.

60%
Looking at fee negotiations over the past four years, we note
a decrease in negotiations for 25% of respondents in 2013
40%
and 13% in 2014 (year to date).

20%
Asset allocation can influence fund sponsors potential to
negotiate fees, as some asset classes are more open to
negotiations than others. On the following page we list asset
0%
2011
2012
2013
2014 YTD
classes according to frequency of fee negotiations.
20
Fee Negotiation Practices Among Fund Sponsors (continued)

In a reversal from 2011, fund sponsors report fee negotiations frequently occur in alternative asset classes such as
Indicate the frequency of fee negotiations for the asset classes your fund owns.
commodities, infrastructure, and hedge funds. Investors

were split on hedge funds; 42% indicated they always or frequently negotiate fees for these strategies while 50% rarely
or never do. Nearly one-third of respondents indicated they
always negotiate fees for non-U.S. fixed income.
Always
of respondents report always or frequently negotiating fees

for this asset class. Negotiations in U.S. large cap equity
dropped to the bottom of the list from second place in 2011.
Sometimes
Commodity Funds
33%
17%
8%
30%
17%
13%
Infrastructure
Private equity remained low on the list, as less than one-third
Frequently
27%
Hedge Funds
25%
17%
Hedge Fund-of-Funds
31%
Core Fixed Income
13%
23%
Small Cap Equity
14%
20%
Global Equity
18%
Non-U.S. Equity
17%
21%
Mid Cap Equity
17%
23%
26%
20%
10%
Private Equity
20%
10%
Large Cap Equity
16%
10%
31%
Real Estate
18%
9%
29%
0%
20%
40%
37%
29%
29%
60%
80%
39
28
47
38
16%
20%
16
44
23%
14%
30%
13%
22
29%
26%
26%
31%
5%
15%
17%
28%
14%
12
20%
7%
32%
11%
8%
13%
20%
25%
15%
11
23%
31%
14%
9%
42%
19%
23
17%
27%
32%
6%
12
25%
22%
8%
14%
27%
17%
18%
18%
Number of
Never Respondents
Rarely
24%
29
20%
30
20%
30
14%
49
15%
34
100%
Percentage of Respondents
21
Fee Negotiation Practices Among Investment Managers

Consistent with previous surveys, nearly all investment
managers (91%) report they are willing to negotiate fees.
Fee Negotiations
While 92% of investment managers will negotiate fees with
Yes
new clients, they do so with less than half (39%) of new

clients, on average. Fewer managers negotiate fees with
existing clients: 73% are open to fee negotiations with exist-
No
92% (with 39% of clients, on average)
Do you negotiate fees with new clients?
8%
ing clients, and typically do so with just 9% of their clients.

73% (with 9% of clients, on average)
Do you negotiate fees with existing clients?
27%
Nearly 60% of respondent firms will negotiate across all

mandates offered, but the remaining firms will not for certain
asset classes or smaller accounts, particularly within pooled
59%
Do you negotiate fees for all mandates?
vehicles and capacity-constrained products.
0%
20%
41%
40%
60%
80%
100%
Investment managers report that public funds most frequently negotiate fees, followed by corporate. As in 2011
and 2009, managers typically negotiate the least with
endowments/foundations.
What types of your firms clients typically negotiate fees?

2.3
Public
2.1
Corporate
Multi-Employer
2.0
Other
2.0
1.9
Endowment/Foundation
0.0
1.0
2.0
3.0
Weighted Average Score
22
Fee Negotiation Practices: Multi-Mandate Portfolios

In 2014, just 20% of investment managers report they do
not give fee discounts to clients for whom they manage mul-
Primary Discounts Applied to Multi-Mandate Portfolios
tiple portfolios, down from 36% in Callans 2011 survey.
2011
2014
The most common method of addressing multi-mandate
45%
Discount applied to sum of all fees
35%
portfolios is to provide a relationship discount by calculating fees for individual products separately at individual
product allocation levels and applying a discount to the sum
of all fees (45%). This represents an increase in frequency
method of offering discounts to clients with multiple man-
15%
NA
11%
9%
First product funded charged firstA
dates (compared to 37% in 2009 and 28% in 2006).
8%
11%
Other
Eleven percent of respondents apply the fee schedule for the
Highest funded product charged firstA
4%
3%
Most expensive product charged firstA
3%
6%
first product funded with the next product charged at the incremental funding level. Just 3% of firms apply fees to the most
at the incremental funding level. Eight percent of firms use
36%
Varies by client
relative to 2011 (35%), and remains the most popular
expensive product first, with the next product funded charged
20%
No discounts given
0%
other approaches to negotiate multi-mandate relationships.
10%
20%
30%
40%
50%
Percentage of Investment Manager Responses

A
Next product charged at incremental funding level
23
Fee Negotiation Practices: Most Favored Nation

Most favored nation (MFN) clauses generally dictate that an
investment manager will give a fund sponsor investor the
Do you have Most Favored Nation (MFN) clauses in place with clients?
lowest fee that is available to other comparable investors.
Yes
No
More than three-quarters of investment managers (76%) will
76%
provide MFN clauses to a portion of their clients, though several firms indicated it is not something they actively offer. On
0%
average, 16% of clients have an MFN clause in their contract
20%
24%
40%
60%
80%
100%
(down from 23% in 2011).

To classify groups of comparable investors for MFN clauses,
investment managers most often group investors by the
size of the fund or investment (67%) followed by the strategy type (61%). Length of client relationship dictates MFN
clauses for just 12% of respondents.
How do you classify nations, or groups, of like clients?A

67%
By investment size
61%
By strategy type
38%
By product type
By vehicle type
32%
By fund type
31%
16%
By fund size
14%
By tax status (exempt or not)

By length of relationship
12%
Other
12%
10%
By domicile
0%
A
10%
20%
30%
40%
50%
60%
70%
Multiple responses allowed.
24
Published Versus Actual Fees

The following pages report on published versus actual fee
data, when available, on 15 different asset classes. Published
(or standard) fee information for most asset classes is sourced
from Callans investment manager database where laddered
or sliding scales are applied to account sizes.
Actual fees represent payments fund sponsors made in 2013
Methodology Used to Report Findings

Active Equities
Passive Equity and Fixed Income
U.S. Mid Cap Equity
Non-U.S. Equity
U.S. Broad Market Fixed Income
to their investment managers, reported as a percent of total
Global Equity
account size in basis points. Actual fees differ from published
Non-U.S. Equity
fees to varying degrees, depending on the asset class.
Non-U.S. Small Cap Equity

Note that differences between actual and published fees for

all asset classes may reflect:
Active Fixed Income
How much the published fee schedule is negotiated,
Core Fixed Income
Differences in the actual and published fee database

participants,
Alternatives
Real Estate
Private Equity
Hedge Fund-of-Funds
Hiring practices of individual fund sponsors (e.g., choosing

lower fee products),
Bundling of services when fund sponsor utilizes multiple
manager products or services, and/or
Published Fees:
Sourced from Callans investment manager database of like-styled products and other industry sources.
Institutional demand and product availability.
Actual Fees:
In Appendix 1 we include published fee distributions for 18
Sourced from fund sponsor fee survey responses and Callans Fund Sponsor Database.
additional asset classes and sub-asset classes, including large cap core, value, and growth equities, global fixed
income, emerging market debt, and others. Appendix 2
reveals published and actual fee distributions from Callans
2011 Investment Management Fee Survey, which we use as
a basis for commentary on fee changes over time.
25
Published Versus Actual Fees: Active U.S. Large Cap Equity

In these exhibits we address active U.S. large cap equity
separate accounts. Individual published fee schedules for
Active U.S. Large Cap Equity Fees (basis points) by Account SizeB
U.S. large cap core, growth, and value strategies are avail-
2013 Median Actual Fees
2013 Median Published Fees
able in Appendix 1.
80 bps
The active large cap fee pattern generally reflects a mature

product segment: (1) there is an overall fee decline the
60 bps
larger the account size; and (2) actual fees are generally
lower than published fee ranges.
40 bps
Separate account fees range by 25 to 30 bps across

account sizes for published fees, but grow as high as 68 bps
for actual fees. For accounts less than $10 million, median
20 bps
actual fees represent around 70% of published fees.

Actual commingled account fees appear comparable to
0 bps
separate account fees. Looking at published fees, large

cap growth equity strategies carry a slight premium (from
<$10mm
1 to 7 basis points) in published fees over core and value
$10 to
$25mm
$25 to
$50mm
$50 to
$75mm
$75 to
$100mm
$100 to
$200mm
>$200mm
peers. This premium declines as account size grows. See

Appendix 1 for details.
10th percentile
85
62
79
72
75
65
73
95
70
63
65
66
25th percentile
75
58
71
65
66
57
63
66
60
51
54
61
47
35
Median
70
50
65
59
59
51
55
47
53
50
49
47
25
Published fees were relatively flat across account sizes rel-
75th percentile
60
46
60
51
54
38
50
37
49
41
43
31
20
ative to 2011. Changes to median actual fees were mixed
90th percentile
55
44
54
35
50
23
47
30
45
35
36
15
15
Average
69
53
65
57
60
49
57
57
55
51
50
44
30
# of observations
340
3*
340
18
340
22
340
7*
340
15
340
19
83
2011 versus 2013 Trends
by account size; surprisingly, smaller accounts saw modest fee declines (around 5 bps) while larger accounts saw
increases of around 15 bps.
Trend commentary reflects comparisons of median fees for separate accounts. See Appendix 2 for 2011 data points.
Includes active large cap core, growth, and value strategies. Passive and enhanced index products are not included. Published fee distributions for large cap
core, growth, and value are in Appendix 1.
* Insufficient fee data or small sample size.
A
B
26
Published Versus Actual Fees: Active U.S. Mid Cap Equity

Active mid cap equity strategies charge a notable premium
over large cap equity mandates. Median mid cap published
Active U.S. Mid Cap Equity Fees (basis points) by Account SizeB
fees are around 10 to 14 basis points (or 14% to 30%)
higher than large cap equity counterparts.
90 bps
Actual mid cap fees are generally quite a bit lower than
published, ranging from 8 to 30 bps less across account
80 bps
sizes. Median actual fees represent around 60% to 90% of

published fees.
70 bps
2011 versus 2013 TrendsA

Median published fees increased marginally across account
60 bps
sizes over the past two years, ticking up by 1 to 4 bps. Actual

fees declined modestly over this time period (by 1 to 8 bps) for
50 bps
the account sizes where we had ample data for comparison.
40 bps
<$10mm
$10 to
$25mm
10th percentile
98
80
87
25th percentile
85
73
85
$25 to
$50mm
$50 to
$75mm
$75 to
$100mm
$100 to
$200mm
85
68
82
82
80
79
76
66
78
64
75
70
75
69
70
62
>$200mm
*
64
53
Median
80
50
76
73
54
69
50
67
50
63
55
47
75th percentile
75
50
71
65
39
60
44
59
39
55
54
42
90th percentile
60
50
60
55
31
51
40
49
23
45
52
24
Average
80
60
76
72
51
68
59
66
52
62
57
49
# of observations
86
6*
86
86
5*
86
3*
86
11
86
10
17
Trend commentary reflects comparisons of median fees. See Appendix 2 for 2011 data points.
Includes fee data for separate accounts.
A
B
27
Published Versus Actual Fees: Active U.S. Small Cap Equity

Small cap is more expensive than other U.S. equities, running about 15 to 20 bps more than mid cap and around 30
Active U.S. Small Cap Equity Fees (basis points) by Account SizeB
bps more than large cap across account sizes for published
fees. For actual fees, the disparity grows as large as 40 bps
100 bps
for smaller account sizes.

In 2013, published fees were flat relative to 2011. Consistent
90 bps
with findings in Callans 2006, 2009, and 2011 fee surveys,

the upper bands for published and actual fees remain 100
80 bps
basis points for nearly all account sizes.

The range of published fees starts at 24 basis points and
70 bps
grows with account size, suggesting greater negotiating

ability at larger allocation levels. The spread between pub-
60 bps
lished and actual median fees grows with account size, from
9 bps for the smallest accounts to 13 bps for the largest.
50 bps
<$10mm
Median published fees were flat relative to 2011 across
$10 to
$25mm
$25 to
$50mm
$50 to
$75mm
$75 to
$100mm
$100 to
$200mm
>$200mm
account sizes. Published fees have not changed much relative to Callans 2009 survey, as well. Actual fees notched
10th percentile
100
114
100
100
100
99
100
78
100
80
100
85
increases across account sizes in the range of 6 to 14 bps.
25th percentile
100
100
100
97
100
90
94
75
93
77
90
73
Median
74
64
100
91
94
85
88
84
83
71
81
71
77
64
50
75th percentile
90
72
85
69
80
68
77
53
75
65
69
54
41
90th percentile
76
64
75
50
73
54
69
42
67
61
60
49
27
Average
94
89
92
81
88
79
85
65
84
72
80
65
51
283
12
283
23
283
18
283
10
283
14
283
29
25
# of observations
Includes fee data for separate accounts for active small cap core, growth, and value strategies. Published fee distributions for small core, growth, and value
are in Appendix 1.
A
B
28
Published Versus Actual Fees: Active Global Equity

Global equity published fees fall between 47 to 97 bps
across account sizes. Actual fee data are quite limited for
Active Global Equity Fees (basis points) by Account SizeB
all but the largest account sizes (greater than $200 million),
suggesting more limited use of global mandates outside of
80 bps
the very biggest funds. The median actual fee for accounts
larger than $200 million is 42 bps, just slightly higher than
actual fees for non-U.S. equity (detailed on the following
70 bps
page).
60 bps
Published active global equity commingled fund fees are

similar to separate account fees. Actual global equity fees
50 bps
are in line with non-U.S. equity. Similar to non-U.S. active

equity fees, median published global equity fees carry a premium over their U.S. active large cap counterparts ranging
40 bps
from 5 to 12 bps across account sizes.
30 bps
Published fees for global equity mandates were flat for

<$10mm
accounts less than $200 million relative to 2011 and 2009.
$10 to
$25mm
$25 to
$50mm
94
67
90
83
61
80
$50 to
$75mm
$75 to
$100mm
$100 to
$200mm
>$200mm
Median published fees for the largest accounts notched up

2 bps relative to 2011, while actual fees at this account size
10th percentile
97
level ticked up by 9 basis points.
25th percentile
85
88
77
87
77
71
75
85
54
73
51
51
47
Median
75
75
53
70
67
60
65
59
48
42
75th percentile
70
70
46
63
60
45
59
51
44
37
90th percentile
60
60
42
60
56
36
52
47
42
24
Average
76
75
54
73
70
57
69
63
48
41
# of observations
77
77
3*
77
77
7*
77
77
2*
37
A
B
29
Published Versus Actual Fees: Active Non-U.S. Equity

Published fees for non-U.S. active equity start at around 75
bps and decline to around 50 bps as accounts size grows.
Active Non-U.S. Equity Fees (basis points) by Account SizeB
Actual fees reveal an inconsistent pattern for this asset
class, increasing in the $50 to $100 million account size
80 bps
range before dropping precipitously for accounts larger than

$200 million. The spread between median published and
actual non-U.S. active equity fees ranges from about zero
70 bps
to 15 bps.
60 bps
Actual commingled funds generally charge a premium over

separate accounts of 2 to 20 basis points, due in part to
50 bps
custody and other charges. Median actual non-U.S. equity

fees run an average of 8 bps higher than their U.S. large cap
active equity counterparts, while published non-U.S. equity
40 bps
fees are 10 bps higher, on average.
30 bps
Median published fees for non-U.S. equity mandates were

<$10mm
flat across account sizes relative to 2011. Findings were
$10 to
$25mm
$25 to
$50mm
$50 to
$75mm
$75 to
$100mm
$100 to
$200mm
>$200mm
mixed with respect to actual fees. Actual fees were flat or

declined for accounts less than $50 million, but grew 5 to 10
10th percentile
90
80
85
94
84
64
80
75
80
72
79
67
bps for larger accounts.
25th percentile
80
67
80
82
75
57
73
69
70
68
63
60
53
45
Median
75
56
75
65
71
54
67
65
65
64
57
51
39
75th percentile
70
45
69
55
64
51
59
59
57
51
49
44
31
90th percentile
60
28
60
22
55
47
52
38
49
39
45
34
20
Average
74
55
73
63
70
55
66
61
64
58
59
52
38
116
11
116
8*
116
6*
116
13
116
5*
116
16
71
# of observations
A
B
30
Published Versus Actual Fees: Active Non-U.S. Small Cap Equity

Non-U.S. small cap active equity fee distributions reflect
separately managed, commingled, and institutional mutual
Active Non-U.S. Small Cap Equity Fees (basis points) by Account SizeB
fund vehicles due to sample size limitations.

120 bps
The range in published fees is comparable to U.S. active

small cap equity at around 25 basis points across account
sizes. Limited data was available for actual fees for accounts
100 bps
smaller than $100 million, but on average fees ran around

87 bps for smaller accounts. For accounts between $100
and $200 million, the median actual fee paid was 79 bps,
80 bps
falling to 64 bps for accounts larger than $200 million. Fee

differences may be attributable to vehicle type and whether
or not custody and administrative costs are included.
60 bps
Median published non-U.S. small cap fees are comparable

to their U.S. small cap equity counterparts for the smallest
40 bps
account sizes, and run about 2 to 7 bps higher for accounts

greater than $25 million. Non-U.S. small cap fees charge a
<$10mm
premium of about 20 to 25 bps over broad non-U.S. equity
$10 to
$25mm
$25 to
$50mm
$50 to
$75mm
$75 to
$100mm
$100 to
$200mm
>$200mm
accounts.
10th percentile
100
25th percentile
100
100
100
100
97
100
95
100
93
91
92
99
93
89
82
74
66
Median published fees for non-U.S. small cap equity man-
Median
95
95
90
88
85
87
84
79
64
dates were flat for accounts smaller than $50 million, and
75th percentile
85
85
85
85
75
82
75
76
60
ticked up 3 to 4 bps for larger accounts relative to 2011. The
90th percentile
76
76
76
76
69
76
74
67
58
Average
93
93
91
89
83
88
84
85
64
# of observations
23
23
23
23
3*
23
23
10
one account size where there was sufficient data to compare

actual fees ($100 to $200 million) reveals a 5 bps increase.
Includes fee data for separately managed, commingled, and institutional mutual fund vehicles.
A
B
31
Published Versus Actual Fees: Active Emerging Market Equity

Emerging market fees reflect separately managed, commingled, and institutional mutual fund vehicles due to sample
Active Emerging Market Equity Fees (basis points) by Account SizeB
size limitations. Actual fee data are limited in this area for
multiple account sizes, but we show data where Callan feels
120 bps
it is representative of the marketplace.

Published fee distributions range from around 28 to 35
100 bps
basis points across account sizes. Upper bands for emerging markets fees are the highest of the publicly traded asset
classes in this report and remain at or above 1%, consistent
80 bps
with previous survey findings. Median published emerging

market fees carry a 20 to 30 basis point premium over their
non-U.S. developed market counterparts.
60 bps
Actual fee ranges are notably wider and higher than published fees due to the inclusion of institutional mutual fund
40 bps
vehicles in this group. Published fees include only separate accounts and commingled funds (which may or may
<$10mm
not include custody and administrative costs). The highest
$10 to
$25mm
$25 to
$50mm
$50 to
$75mm
$75 to
$100mm
$100 to
$200mm
>$200mm
actual fee observations for the smaller account sizes are

mutual fund vehicles, which charge more than separate
10th percentile
113
accounts and commingled funds and reflect all-inclusive
25th percentile
100
expense ratios.

Median published emerging markets fees marginally were
flat or declined across asset sizes, falling 5 bps at the smallest account size and 2 bps at the largest. Actual fee data
110
113
110
96
103
148
100
89
100
92
100
101
100
96
100
87
100
88
91
84
78
74
Median
95
95
82
95
96
92
81
90
88
86
75
64
75th percentile
85
85
57
85
95
85
76
84
47
78
65
51
90th percentile
78
78
51
76
94
75
64
71
22
65
52
32
Average
94
93
82
92
95
90
98
88
61
84
73
60
# of observations
56
56
8*
56
4*
56
6*
56
3*
56
7*
33
sample sizes were too limited in 2011 and 2013 to draw

trends over time.
Includes fee data for separately managed, commingled, and institutional mutual fund vehicles.
A
B
32
Published Versus Actual Fees: Active Core Fixed Income

This is the first year that Callan has examined core fixed
income fees separate from core plus. Published core strate-
Active Core Fixed Income Fees (basis points) by Account SizeB
gies tend to charge around 2 to 5 bps less than core plus
across account sizes. Published core fees fall within a nar-
40 bps
row range across account sizes (11 to 15 bps). Fees decline

as account sizes increase in this mature market segment.
30 bps
Actual fee data is limited for accounts smaller than $50 million because we collected information on separate accounts
only. Many smaller core fixed income accounts are in com-
20 bps
mingled funds, which are not covered on this page.

At 1 to 8 basis points, the gap between published and actual
10 bps
fixed income fees is smaller relative to other asset classes

examined in this survey. Median actual fees for accounts
larger than $50 million are about 70% to 90% of published
0 bps
fees.
$10 to
$25mm
<$10mm
$25 to
$50mm
$50 to
$75mm
$75 to
$100mm
$100 to
$200mm
>$200mm
This is the first year Callan has examined core fees separate from core plus, so direct comparisons are skewed
10th percentile
40
by the inclusion of core plus fixed income in broad fixed
25th percentile
35
37
35
35
32
34
27
34
32
32
26
30
26
30
30
27
23
22
19
income in 2011. Published core fixed income fees were flat
Median
33
30
30
28
20
27
26
24
19
15
relative to 2009. Actual fees declined modestly for accounts
75th percentile
30
30
27
25
15
24
25
21
16
10
less than $25 million and greater than $100 million by 1 to 4
90th percentile
25
25
24
23
14
23
19
19
14
Average
32
31
30
28
21
27
26
25
20
15
# of observations
76
76
76
76
4*
76
6*
76
11
38
basis points, but increased 2 to 5 basis points for accounts

between $25 and $100 million.
Trend commentary reflects comparisons of median fees. See Appendix 2 for 2011 data points. Core and core plus were combined in 2011.
A
B
33
Published Versus Actual Fees: Active Core Plus Fixed Income

This is the first year that Callan is looking at core plus fixed
income fees separate from core. Published core plus fees
Active Core Plus Fixed Income Fees (basis points) by Account SizeB
tend to fall around 2 to 5 bps higher than core fees across
account sizes. The range of published core plus fees is simi-
40 bps
lar to core at 9 to 15 bps.

Actual core plus fees are similar to published fees; fund
30 bps
sponsors collectively paid 2 to 5 bps less than published

schedules at the median for accounts greater than $50
million. Core plus is one of the asset classes where fewer
20 bps
fund sponsors report frequent, successful fee negotiations

(page 21). Actual fee data is limited for accounts smaller
than $50 million.
10 bps
Published core plus fees are 15 to 19 bps less than high
yield fixed income (examined on the following page).
0 bps

<$10mm
Core plus fees generally held steady over the past two
$10 to
$25mm
$25 to
$50mm
$50 to
$75mm
$75 to
$100mm
$100 to
$200mm
>$200mm
years, a finding that is hidden when comparing data from

Callans current and 2011 surveys. (This is the first year
10th percentile
45
Callan examines core plus fees separately from core, so
25th percentile
40
40
36
39
35
37
29
36
29
33
34
34
28
33
29
29
25
30
26
direct comparisons are skewed by the inclusion of core fixed
Median
35
35
30
30
25
30
28
26
24
19
income in 2011). Published core plus fees increased 2 to 5
75th percentile
30
30
30
28
23
27
27
25
22
15
bps relative to published broad fixed income fees in 2011.
90th percentile
30
30
30
28
21
26
26
24
20
13
Average
35
34
33
32
25
31
28
28
26
21
# of observations
36
36
36
36
3*
36
3*
36
7*
31
Similarly, actual fees ticked up by 3 and 4 bps for account

sizes greater than $50 million.
Trend commentary reflects comparisons of median fees. See Appendix 2 for 2011 data points. Core and core plus were combined in 2011.
A
B
34
Published Versus Actual Fees: High Yield

High yield fees reflect separately managed accounts and
commingled funds due to sample size limitations. Fees for
Active High Yield Fees (basis points) by Account SizeB
the two vehicle types are comparable.

70 bps
High yield demands a notable premium over core and core

plus fixed income fees. High yield fees are generally 15 to
20 bps higher than their broad market U.S. fixed income
60 bps
counterparts.
We collected fewer actual high yield fee data points than
50 bps
published fee data; however actual fees are quite similar

to published fees in this asset class for accounts smaller
than $100 million. We note more negotiation at the larger
40 bps
end of the spectrum (greater than $100 million), where the

median actual fee is closer to 10 bps less than the median
published fee.
30 bps
<$10mm
The range of high yield fees compressed from around
$10 to
$25mm
$25 to
$50mm
$50 to
$75mm
$75 to
$100mm
$100 to
$200mm
56
50
53
48
50
50
50
46
>$200mm
25 in 2011 to 20 in 2013, suggesting maturation of the

asset class. Median published high yield fees were flat for
10th percentile
65
56
64
accounts smaller than $75 million and decreased by 1 to 2
25th percentile
55
52
55
62
57
58
52
51
50
56
47
bps for larger accounts. Actual fees declined by 2 bps for the
Median
50
48
50
50
50
48
48
46
44
40
39
smallest account size (actual fee data was available only for
75th percentile
50
37
50
45
50
45
44
39
40
33
31
accounts smaller than $25 million in 2011).
90th p ercentile
45
21
45
42
50
40
38
32
34
31
22
Average
52
41
52
51
52
49
48
42
44
40
39
# of observations
51
4*
51
51
6*
51
51
4*
51
4*
25
Includes fee data for separate accounts and commingled funds.
A
B
35
Published Versus Actual Fees: Passive U.S. Large Cap Equity

Passive U.S. large cap equity actual fees reflect separately
managed accounts and commingled funds due to sample
Passive U.S. Large Cap Equity Fees (basis points) by Account SizeB
size limitations. Published fee data includes S&P 500 and
Russell 1000 fee schedules. Commingled funds and sepa6 bps
rate account options reveal very little difference in pricing.

The range of passive U.S. large cap equity fees is, not
5 bps
surprisingly, narrow at 5 bps or less across account sizes.

Published passive, large cap equity fees average 8% of
4 bps
large cap active counterparts. Median actual fees are 1 to 2

basis points less than published fees across account sizes.
Fee negotiations, benchmark, vehicle type, relationship
3 bps
pricing, and whether or not the portfolio participates in securities lending are all factors that can account for differences.
2 bps

Median published fees decreased by 1 to 3 basis points
1 bps
for accounts less than $75 million and were flat for larger
<$10mm
$10 to
$25mm
10th percentile
10
10
25th percentile
accounts. Median actual fees for the largest accounts

($200 million and greater) were consistent with previous
survey findings.
$25 to
$50mm
*
$50 to
$75mm
$75 to
$100mm
$100 to
$200mm
*
>$200mm
3
2
Median
75th percentile
90th percentile
Average
11
3*
11
11
7*
11
8*
11
11
49
# of observations
A
B
36
Published Versus Actual Fees: Passive Non-U.S. Equity

Similar to U.S. large cap equity, the range of non-U.S. passive equity published fees is fairly narrow across account
Passive Non-U.S. Equity Fees (basis points) by Account SizeB
sizes, approximately 7 basis points. Due to limited published
fee data, the sample is composed of both commingled and
30 bps
separate account fee schedules for MSCI EAFE Index and

MSCI ACWI ex-U.S. Index funds.
25 bps
Published non-U.S. passive equity fees are approximately
20 bps
17% of their non-U.S. active equity counterparts. Actual fee

data are sparse for portfolios less than $200 million, sug-
15 bps
gesting fund sponsor use of passive strategies may be

limited outside of the largest funds. At the largest account
10 bps
level, median actual fees are 4 bps at the median and 6

bps on average. Differences between actual and published
5 bps
fees may be attributable to a variety of factors, including

the vehicle type and whether or not the vehicle engages in
0 bps
securities lending.
<$10mm
$10 to
$25mm
$25 to
$50mm
$50 to
$75mm
$75 to
$100mm
$100 to
$200mm
>$200mm
Median published non-U.S. passive equity fees were flat or

marginally declined by 1 or 2 bps since the 2011 survey. The
10th percentile
15
15
15
14
14
14
10
13
median actual fee for accounts greater than $200 million
25th percentile
13
13
13
13
12
12
10
12
was flat at 4 bps.
9
6
Median
12
12
12
11
11
11
10
11
75th percentile
11
11
11
10
10
10
90th percentile
10
12
12
12
10
11
11
10
10
2*
4*
7*
1*
1*
4*
20
Average
# of observations
A
B
37
Published Versus Actual Fees: Passive U.S. Fixed Income

Few investment management firms offer passive fixed
income strategies. Due to limited published fee data, the
Passive U.S. Fixed Income Fees (basis points) by Account SizeB
U.S. broad market passive fixed income sample includes
separate account and commingled fund vehicles, with and
10 bps
without securities lending. The range in published fees is

a narrow 5 basis points across account sizes. Published
broad market passive fixed income fees are about 20% of
8 bps
actively managed core fixed income mandates.

6 bps
Actual fee data are limited for portfolios of less than $200
million. At the largest account levels, median actual fees are
around half of published fees.
4 bps
Fee differences may be attributable to vehicle type
2 bps
and whether or not the vehicle uses securities lending.

Additionally, some custodians also manage passive fixed
0 bps
income strategies and may offer fee discounts to their custody clients that invest in these strategies.
$10 to
$25mm
<$10mm

Published fees for broad market fixed income mandates
10th percentile
have generally been flat relative to data collected in 2006,
25th percentile
2009, and 2011 survey findings.
$25 to
$50mm
$50 to
$75mm
$75 to
$100mm
*
9
7
$100 to
$200mm
*
>$200mm
*
4
3
Median
75th percentile
90th percentile
Average
# of observations
3*
4*
25
A
B
38
Published Versus Actual Fees: Real Estate Core Open-Ended and Value-Added
For real estate, we display published fees for core
open-ended commingled funds and value-added com-
Real Estate Fees (basis points) by Account SizeB
mingled funds and separate accounts; actual fees are
140 bps
displayed for core open-ended separate accounts and

commingled funds across all account sizes. Stated
2013 Median Published

Fees: Core Open-Ended
130 bps
120 bps
2013 Median Actual

Fees: Core Open-Ended
110 bps

Fees: Value Added
100 bps
2013 Median Actual

Fees: Value Added
fees incorporate base and incentive fees, where applicable.
REITs
are
covered
on
the
following
page.
The range in fees for core open-ended commingled funds

(the difference between the 10th and 90th percentiles) is
narrower for the smaller accounts at around 23 basis points,
but grows to 37 basis points for accounts in the $100 to
90 bps
$200 million size range. Value-added fees span a wider

80 bps
range at 88 bps across account sizes.
All Account Sizes

Actual Fees
70 bps
Looking at actual fees, we note that the median for core

open-ended funds is 76 bps across account sizes, or 82%
<$25mm
of average published fees. Interestingly, the median value-
$25 to
$50mm
$50 to
$75mm
$75 to
$100mm
$100 to
$200mm
Core
Open-Ended Value-Added
added commingled fund fee runs higher than the median

published fee across account sizes at 135 bps. This is in
part due to the small account sizes included in the sample:
10th percentile
108
150
104
150
101
150
100
150
96
150
101
158
71% of the accounts included in the value-added actual fee
25th percentile
103
150
97
150
95
150
95
125
93
125
97
150
distribution are smaller than $25 million.

Relative to 2011, median published core open-ended commingled fund fees increased by 4 to 9 bps for accounts
under $200 million and by 1 bp for accounts larger than
Median
99
125
96
125
95
125
89
116
86
111
76
135
75th percentile
95
100
92
100
85
100
85
100
80
100
66
106
90th percentile
83
63
81
63
78
63
77
63
59
63
42
89
Average
97
120
92
118
90
115
87
112
83
110
78
129
# of observations
29
36
29
36
29
36
29
36
29
36
33
14
$200 million. Core open-ended actual fees (for all account

sizes) ticked up 8 bps (12%). The increases could be a result
of concessions for newly created funds running off. Valueadded fees grew more substantially, by around 15 bps for
accounts under $100 million and 11 bps for larger accounts.
A
B
39
Published Versus Actual Fees: Global REITs

On this page we compare published REIT fee data for
separate accounts and commingled funds for five different
Global REITs Fees (basis points) by Account SizeB
account size ranges, and actual fee data for both vehicles
80 bps
for all account sizes.

The range in fees for separate accounts (20 basis points,

Fees: Commingled Funds
70 bps
2013 Median Actual

Fees: Commingled Funds
60 bps

Fees: Separate Accounts
50 bps
2013 Median Actual

Fees: Separate Accounts
on average) is slightly wider than for commingled funds (16

basis points). Commingled funds generally charge a premium of several basis points over separate accounts that
is more apparent in the average figures than the medians
(shown in the line chart); this premium grows as account
size increases.
40 bps
Separate account fees decline for larger account sizes while
All Account Sizes

Actual Fees
commingled funds generally use either a flat fee or offer

30 bps
breakpoints at higher levels relative to separate accounts.
<$25mm
Actual commingled REIT fees fall 6 basis points lower than
$25 to
$50mm
$50 to
$75mm
$75 to
$100mm
$100 to
$200mm
Commingled
Funds
Separate
Accounts
the average of published fees. For separate accounts this

disparity is larger, with the median actual fee falling 25 basis
points below the average of median published fees.
10th percentile
87
84
84
80
78
80
75
79
75
76
94
71
25th percentile
85
80
80
80
75
77
75
75
74
69
71
53
Median
75
77
75
75
73
73
71
71
69
63
67
47
Relative to 2011, median published REIT fees were flat for
75th percentile
70
70
70
65
70
64
69
64
66
58
62
43
separate accounts sizes except the $100 to $200 million
90th percentile
70
65
66
63
61
60
60
58
60
52
55
36
Average
78
75
75
73
72
70
71
68
69
63
73
49
# of observations
13
24
12
24
12
24
12
24
11
21
8*
14
range, which saw an increase of 7 basis points. Commingled

fund published fees were also flat, with a slight uptick of 2
basis points for accounts between $50 and $200 million.
Actual commingled REIT funds median fee increased 5 bps
(8%) since 2011.
* Note the small number of respondents.
A
B
40
Actual Fees: Private Equity

We display actual private equity fees for separate accounts,
limited partnerships, and fund-of-funds (FOFs) for a broad
Private Equity Fees (basis points) All Account Sizes*
range of account sizes (net asset values) and capital com350 bps
mitments. These data provide insight into the average fee

over the life of an investment. There are no sources of
300 bps
published private equity fee data for comparison. Separate

accounts generally provide significant economies of scale
250 bps
resulting in lower fees (median of 61 bps). FOF fees are
200 bps
around 30% higher at a median of 78 bps. The median limited partnership is more than double that figure (158 bps).*
150 bps
Fee ranges are broad, as the amount of capital committed
100 bps
and the investment value vary over time and by investor. For
50 bps
example, an FOF that initially charges 100 basis points can

drop its fee to as low as 20 basis points at the end of the invest-
0 bps
ments life when it is almost liquidated. In separate accounts,
Separate
Accounts
Fund-ofFunds
Limited
Partnerships
10th percentile
108
103
301
fees typically ramp down over time, thus newer investments

(with more recent fund inception dates) have higher fees.
25th percentile
94
92
200
Separate accounts and FOFs typically charge an annual
Median
61
78
158
management fee only, while additional performance-based
75th percentile
50
49
126
fees are more common with limited partnerships.* Fees are
90th percentile
32
32
52
most frequently based on the amount of committed (rather
Average
70
73
177
than invested) capital for all vehicle types. Sliding fee scales
# of observations
28
22
Have an additional
performance-based fee
13%
25%
65%
Fee Base: Committed

Capital
78%
77%
75%
are common for both vehicle types, as are performancebased fee arrangements.

Separate accounts and FOFs have seen downward movement in fees, particularly for newer vehicles, over the last
few years. While they have not seen direct declines in management fees, limited partnerships have achieved better
economics, resulting in fee declines and better net returns.
*Separate account and FOF fees are for the manager-of-managers only, and do not include fees paid to underlying limited partnerships.
A
41
Actual Fees: Hedge Fund-of-Funds

We compare actual fees across hedge fund-of-funds
(HFOF) account sizes for structures with and without perfor-
Hedge Fund-of-Funds Fees (basis points)
mance incentive fees. A flat management fee structure (no

performance incentive fee) was more frequently employed
150 bps
by survey respondents.
120 bps
Performance incentive fees hit 5% at the median, alongside

a 90 bps base fee. All fund sponsors that reported data for
HFOFs with performance incentive fees have a high-water
90 bps
mark for that fee and a lock-up period.

60 bps
HFOF fees that do not include a performance component

had a median fee of 88 bps. While the median is similar to
30 bps
funds with a performance fee component, the 10th percentile is 30 bps higher.
0 bps
Most fund sponsors report quarterly redemption frequency
(75%), and 90 days is the most common time period
required to provide notice (74%).

HFOFs with performance incentive fees saw little change
at the median for the flat management fee, but the performance incentive percentage declined from 10%. The
median fee for HFOFs without performance incentive fees
dropped from 105 bps in 2011 to 88 bps in 2013 (17%).
With Performance
Incentive Fee
No Performance
Incentive Fee
10th percentile
100
10%
130
25th percentile
100
10%
101
Median
90
5%
88
75th percentile
50
5%
66
90th percentile
16
3%
38
Average
71
7%
87
# of observations
32
Lock-up periods, which are generally 12 months in length,

were more common in 2013 (100%) than in 2011 (50%).
* Note the small number of respondents.
A
42
Future Manager Changes: Fund Sponsors

We asked fund sponsors to indicate their organizations
plans for consolidating or expanding the number of managers used for each asset class during the next 18 months.
Indicate your organizations plans to consolidate or expand the number of managers

used for each asset class listed during the next 18 months.
As in 2011, the greatest percentage of fund sponsors expect

to add managers in private equity (38%), real estate (33%),
and commodity funds (24%). Hedge fund-of-funds dropped
from the top four in 2011, when 44% of respondents
expected to add managers to this asset class, to just 7%
in 2014. In fact, 11% of managers now expect to decrease
the number of hedge fund-of-funds managers in the coming
18 months.
Responses suggest that there will also be manager consolidation in core fixed income, where 18% of respondents expect to
delete managers, and U.S. small cap equities (12%).
No respondents expect to consolidate managers in commodities, global and emerging market fixed income, and
infrastructure.
38%
Private Equity
3%
33%
Real Estate
No change
Number of
Respondents
59%
64%
2%
39
45
Commodity Funds
24%
76%
21
Global Fixed Income
23%
77%
30
23%
Infrastructure
22%
6%
Hedge Funds
19%
5%
Non-U.S. Equity
17%
11%
16% 3%
Global Equity
Hedge Fund-of-Funds 7% 11%
Emerging Market Fixed Income 6%

Core Plus Fixed Income 5% 10%
Core Fixed Income 4%
71%
48
78%
18
76%
21
72%
54
81%
37
81%
27
31
94%
39
85%
18%
51
78%
U.S. Large Cap Equity 4% 9%
87%
55
High Yield Fixed Income 3% 10%
87%
31
U.S. Mid Cap Equity 3% 5%

U.S. Small Cap Equity 2% 12%
Non-U.S. Fixed Income 3%
0%
Delete managers
Add managers
38
92%
51
86%
29
97%
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
43
Future Product Changes: Investment Managers

We queried investment managers about their plans for
consolidating or expanding product offerings across asset
classes for the next 18 months. For each asset class, more
Indicate your firms plans to consolidate or expand product offerings during the next
18 months by selecting one option for each asset class.
than half of managers do not plan to make changes to their

product offerings.
Responses reveal few intentions, if any, for consolidation
across asset classes. The greatest percentage of managers
indicated they would eliminate hedge fund-of-funds (5%)
followed by real estate (3%). However, a far greater percentage of firms indicated they would be adding both hedge
fund-of-funds (36%) and real estate products (40%).
Absolute return (42%), emerging market equity (39%), and
other fixed income (38%) also ranked highly on the list for
planned product expansions.
Add products
Real Estate
Absolute Return
Hedge Fund-of-Funds
Other Fixed Income
Global Equity
Hedge Funds
Private Equity
Non-U.S. Equity
Other Equity
Infrastructure
U.S. Mid Cap Equity
Balanced
Commodity Funds
Core Fixed Income
Money Market
40%
42%
39%
36%
38%
39%
36%
33%
33%
30%
30%
27%
18%
15%
12% 2%
11% 2%
12%
10%
8%
7%
4%
0%
Delete products
3%
2%
4%
2%
No change
Number of
Respondents
40
45
62
25
48
75
42
24
43
82
46
22
49
80
43
96
94
21
50
68
28
58%
58%
60%
60%
60%
61%
64%
67%
67%
70%
70%
73%
82%
85%
86%
86%
88%
90%
92%
93%
96%
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
44
Investment Managers Perception of Value-Added Justifying Fees

We asked investment managers about their perceptions of
value-added for fees. Consistent with past surveys, investment managers are more likely to report that their firms fees
Response to statement: Value-added provided by investment managers justifies fees

paid by fund sponsors.
are justified, versus the fees of their peers.
Strongly agree
Agree
Seventy percent of respondents strongly agree and 29%

agree that the value-added provided by their specific organization justified the fees paid by fund sponsors, while only
Neutral
Disagree
Strongly disagree
70%
My fees are justified
29%
1% disagree. These figures are consistent with previous
27%
survey findings.
The numbers shift a bit when managers opine on industry-
1% 1%
Industry-wide fees are justified
30%
42%
25%
2%
1%
wide fees: Only 30% of managers strongly agree and 42%

agree that industry-wide fees are justified. A mere 3% of
0%
20%
40%
60%
80%
100%
investment managers do not believe industry-wide fees are

justified, but one-quarter are neutral on the topic.
45
Top Fee Concerns

While investment managers are confident in the valueadded they provide (previous page), fund sponsors are not
uniformly convinced. Fund sponsor organizations top concern regarding fees is whether or not active managers are
providing the value-added to justify the fees (52%) followed
by ensuring that the fees paid for the fund are competitive
with comparable marketplace offerings (37%).
Fund sponsor organizations biggest issues or concerns regarding fees

Other 3%
How to best benchmark
fees against peers and
what is available in the
marketplace 8%
Other concerns expressed by fund sponsors include

whether the index for determining performance fees is reasonable and a broad concern that fees are too high, despite
successful negotiations to lower them.
Investment managers have a wider array of issues surround-
Ensuring that the fees

paid for the fund are
competitive with
comparable marketplace
37%
Whether or not active

managers are providing
the value-added to justify
the fees 52%
ing fees. Their top concerns are fee pressure from market
changes (29%) and the rise of indexing and/or ETF vehicles
(19%). Other high priorities include increasing compliance,
infrastructure, and/or other operating costs (16%), as well
as the low rate environment (11%).
Manager organizations biggest issues or concerns regarding fees

Volatile markets 3%
Proliferation of sub-advisor and
UMA-type arrangements 6%
New competition in
the marketplace 7%
Fee pressure from

market changes 29%
Other 9%
Low rate environment 11%
Rise of indexing and/or

ETF vehicles 19%
Increasing compliance, infrastructure,

and/or other operating costs 16%
46
Appendix I: 2013 Published Fees for Additional Asset Classes
Large Cap Core
Large Cap Growth
Large Cap Value
<$10mm
$10$25mm
$25$50mm
$50$75mm
$75$100mm
$100$200mm
<$10mm
$10$25mm
$25$50mm
$50$75mm
$75$100mm
$100$200mm
<$10mm
$10$25mm
$25$50mm
$50$75mm
$75$100mm
$100$200mm
10th percentile
88
88
86
88
88
75
87
79
76
73
70
65
78
75
73
71
71
63
25th percentile
75
71
65
62
60
60
75
71
67
63
61
57
75
70
61
60
57
53
Median
63
60
58
52
51
49
70
65
60
56
55
50
66
64
58
55
52
49
75th percentile
56
55
50
48
46
43
65
60
55
52
50
45
60
58
53
50
49
43
90th percentile
50
50
42
38
36
33
60
58
53
48
46
39
50
50
47
43
43
38
Average
66
64
60
58
57
54
72
67
63
59
57
52
67
63
58
55
53
49
# of observations
51
51
51
51
51
51
73
73
73
73
73
73
80
80
80
80
80
80
<$10mm
$10$25mm
$25$50mm
$50$75mm
$75$100mm
$100$200mm
<$10mm
$10$25mm
$25$50mm
$50$75mm
$75$100mm
$100$200mm
<$10mm
$10$25mm
$25$50mm
$50$75mm
$75$100mm
$100$200mm
10th percentile
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
25th percentile
Small Cap Core
Small Cap Growth
Small Cap Value
100
100
95
90
88
84
100
100
100
95
94
88
100
100
100
95
94
90
Median
90
90
83
80
77
74
100
100
91
87
85
79
100
97
90
85
83
79
75th percentile
75
75
70
68
67
61
90
90
85
81
79
75
90
86
80
76
74
68
90th percentile
61
60
58
53
51
50
90
85
80
77
75
71
78
77
71
68
66
60
Average
88
86
83
80
79
75
97
95
91
88
87
83
94
92
88
85
83
79
# of observations
53
53
53
53
53
53
66
66
66
66
66
66
77
77
77
77
77
77
<$10mm
$10$25mm
$25$50mm
$50$75mm
$75$100mm
$100$200mm
<$10mm
$10$25mm
$25$50mm
$50$75mm
$75$100mm
$100$200mm
<$10mm
$10$25mm
$25$50mm
$50$75mm
$75$100mm
$100$200mm
10th percentile
87
85
80
77
76
75
125
125
125
125
125
125
100
100
100
100
100
100
25th percentile
85
81
76
76
75
70
125
125
125
125
125
125
100
95
90
87
85
80
Median
75
75
70
66
65
57
125
125
113
108
106
103
95
90
85
80
79
76
75th percentile
70
68
60
57
55
50
100
100
100
100
100
100
85
85
80
77
75
69
90th percentile
65
65
59
55
52
42
100
96
93
90
90
85
80
80
75
72
68
63
Average
75
73
68
66
64
58
112
112
110
108
108
107
92
89
84
81
80
76
# of observations
16
16
16
16
16
16
21
21
21
21
21
21
69
69
69
69
69
69
All Cap U.S. Equity
Microcap U.S. Equity
SMID Cap U.S. Equity
47
Appendix I: 2013 Published Fees for Additional Asset Classes (continued)
Unconstrained
Defensive
Long Duration
<$10mm
$10$25mm
$25$50mm
$50$75mm
$75$100mm
$100$200mm
<$10mm
$10$25mm
$25$50mm
$50$75mm
$75$100mm
$100$200mm
<$10mm
$10$25mm
$25$50mm
$50$75mm
$75$100mm
$100$200mm
10th percentile
76
76
76
74
73
70
39
37
34
32
32
32
38
35
32
30
30
26
25th percentile
65
65
65
63
61
58
35
35
30
30
29
26
35
35
30
30
28
24
Median
49
48
46
46
46
44
30
30
27
26
25
23
30
30
30
27
25
23
75th percentile
40
40
40
40
40
33
25
25
24
22
21
17
25
25
25
25
24
21
90th percentile
40
40
40
37
35
32
20
20
20
18
18
14
23
23
23
23
23
21
Average
54
54
54
52
51
48
30
29
27
26
25
22
31
30
28
27
26
23
# of observations
20
20
20
20
20
20
62
62
62
62
62
62
33
33
33
33
33
33
<$10mm
$10$25mm
$25$50mm
$50$75mm
$75$100mm
$100$200mm
<$10mm
$10$25mm
$25$50mm
$50$75mm
$75$100mm
$100$200mm
<$10mm
$10$25mm
$25$50mm
$50$75mm
$75$100mm
$100$200mm
10th percentile
38
35
33
32
31
28
39
35
33
32
32
29
39
39
38
36
34
52
25th percentile
30
30
27
26
25
21
35
35
30
30
28
25
24
24
24
24
24
24
Median
20
20
20
20
20
18
30
30
29
27
25
23
13
13
13
12
12
13
75th percentile
20
20
16
15
14
13
29
27
25
23
23
20
90th percentile
10
10
10
10
10
10
20
20
20
20
20
15
Average
24
24
22
21
21
18
31
29
27
26
25
23
20
20
20
19
19
21
# of observations
42
42
42
42
42
42
48
48
48
48
48
48
18
18
18
18
18
18
<$10mm
$10$25mm
$25$50mm
$50$75mm
$75$100mm
$100$200mm
<$10mm
$10$25mm
$25$50mm
$50$75mm
$75$100mm
$100$200mm
<$10mm
$10$25mm
$25$50mm
$50$75mm
$75$100mm
$100$200mm
10th percentile
50
50
50
49
49
45
75
75
75
75
75
73
26
25
21
20
20
20
25th percentile
45
45
45
42
40
35
65
65
65
65
65
60
20
20
20
20
20
20
Median
40
40
40
37
35
30
60
60
60
57
56
53
17
17
16
15
14
14
75th percentile
35
35
35
33
32
27
55
55
55
51
50
46
14
14
14
14
14
12
90th percentile
30
30
30
30
30
25
55
55
55
48
47
45
10
10
10
10
10
Average
42
42
41
40
39
35
50
50
50
60
59
56
18
18
17
16
16
15
# of observations
45
45
45
45
45
45
49
49
49
49
49
49
25
25
25
25
25
25
Short Term
Intermediate
Global Fixed Income
TIPS
Emerging Market Debt
Active Cash
48
Appendix II: 2011 Published and Actual Fees
10th percentile
25th percentile
Median
75th percentile
90th percentile
Average
# of observations
U.S. Large Cap Equity - Active

Published
Actual
Published
<$25mm
<$25mm
$25-$50mm
80
72
75
72
65
65
64
57
59
55
50
51
50
35
43
65
55
60
200
43
200
Actual
$25-$50mm
68
60
56
44
31
51
26
Published
$50-$100mm
72
63
55
48
42
56
200
Actual
$50-$100mm
69
55
50
41
30
50
31
Published
$100-$200mm
70
60
53
46
40
55
200
Actual
$100-$200mm
51
43
35
21
14
35
30
Published
>$200mm
65
58
48
43
34
50
200
Actual
>$200mm
40
33
27
21
16
27
57
10th percentile
25th percentile
Median
75th percentile
90th percentile
Average
# of observations
U.S. Mid Cap Equity - Active

Published
Actual
<$25mm
<$25mm
90
80
80
75
75
58
70
50
56
43
75
61
62
16
Published
$25-$50mm
85
80
70
65
52
71
62
Actual
$25-$50mm
81
69
55
48
36
57
8*
Published
$50-$100mm
85
75
68
60
48
68
62
Actual
$50-$100mm
*
Published
$100-$200mm
82
75
66
58
46
66
62
Actual
$100-$200mm
68
55
53
51
47
56
7*
Published
>$200mm
77
67
59
51
43
61
62
Actual
>$200mm
65
60
49
45
43
53
12
10th percentile
25th percentile
Median
75th percentile
90th percentile
Average
# of observations
U.S. Small Cap Equity - Active

Published
Actual
Published
<$25mm
<$25mm
$25-$50mm
100
100
100
100
90
100
93
84
88
85
64
80
75
38
75
91
75
87
132
45
132
Actual
$25-$50mm
100
93
77
68
51
78
26
Published
$50-$100mm
100
93
83
77
73
84
132
Actual
$50-$100mm
82
77
73
59
52
69
20
Published
$100-$200mm
100
90
80
75
72
82
132
Actual
$100-$200mm
78
74
65
53
53
65
16
Published
>$200mm
100
86
76
70
62
79
132
Actual
>$200mm
81
69
57
47
37
59
19
Actual
$25-$50mm
*
Published
$50-$100mm
90
Actual
$50-$100mm
*
Published
$100-$200mm
86
Actual
$100-$200mm
*
Published
>$200mm
82
Actual
>$200mm
51
Global Equity - Active

Published
Actual
<$25mm
<$25mm
91
*
10th percentile
Published
$25-$50mm
90
25th percentile
80
80
75
73
68
48
Median
75
70
67
65
57
39
75th percentile
70
64
60
58
51
33
90th percentile
61
60
56
55
48
25
Average
76
72
68
67
61
40
# of observations
78
78
78
78
78
14
49
Appendix II: 2011 Published and Actual Fees (continued)
10th percentile
25th percentile
Median
75th percentile
90th percentile
Average
# of observations
Non-U.S. Equity - Active

Published
Actual
<$25mm
<$25mm
100
91
84
80
75
65
70
45
61
36
77
64
144
26
10th percentile
25th percentile
Median
75th percentile
90th percentile
Average
# of observations
Non-U.S. Small Cap Equity - Active

Published
Actual
Published
<$25mm
<$25mm
$25-$50mm
100
*
100
100
95
95
90
85
80
76
75
92
90
37
37
10th percentile
25th percentile
Median
75th percentile
90th percentile
Average
# of observations
Emerging Market Equity - Active

Published
Actual
Published
<$25mm
<$25mm
$25-$50mm
113
126
110
100
114
100
100
105
95
90
95
90
80
58
80
97
98
96
66
9*
66
10th percentile
25th percentile
Median
U.S. Broad Fixed Income - Active

Published
Actual
Published
<$25mm
<$25mm
$25-$50mm
39
40
35
35
36
32
31
24
30
Published
$25-$50mm
94
80
71
65
59
74
144
Actual
$25-$50mm
79
76
64
56
50
64
19
Published
$50-$100mm
90
75
67
61
56
70
144
Actual
$50-$100mm
73
66
59
51
45
57
13
Published
$100-$200mm
90
75
65
58
53
68
144
Actual
$100-$200mm
60
56
53
50
48
53
19
Published
>$200mm
84
70
57
53
48
62
144
Actual
>$200mm
56
48
42
35
21
41
48
Actual
$25-$50mm
*
Published
$50-$100mm
100
93
85
80
75
87
37
Actual
$50-$100mm
81
77
75
63
62
72
9*
Published
$100-$200mm
100
92
83
80
75
86
37
Actual
$100-$200mm
84
78
74
68
62
73
7
Published
>$200mm
100
88
80
75
71
83
37
Actual
>$200mm
*
Actual
$25-$50mm
*
Published
$50-$100mm
103
100
95
86
78
94
66
Actual
$50-$100mm
*
Published
$100-$200mm
100
100
92
84
77
93
66
Actual
$100-$200mm
*
Published
>$200mm
100
91
88
81
75
88
66
Actual
>$200mm
78
71
66
55
48
63
10
Actual
$25-$50mm
37
31
26
Published
$50-$100mm
33
31
28
Actual
$50-$100mm
36
30
25
Published
$100-$200mm
32
30
28
Actual
$100-$200mm
25
23
20
Published
>$200mm
31
26
25
Actual
>$200mm
23
19
15
10
75th percentile
29
15
26
16
25
22
24
15
21
90th percentile
25
24
14
22
15
20
17
Average
32
25
30
25
28
26
27
18
25
14
145
30
145
18
145
21
145
32
145
70
# of observations
50
10th percentile
25th percentile
Median
75th percentile
90th percentile
Average
# of observations

Published
Actual
<$25mm
<$25mm
10
10
8
8
8
5
5
4
5
3
7
7
16
15
Published
$25-$50mm
9
8
7
5
5
7
16
Actual
$25-$50mm
10
8
6
5
3
6
8*
Published
$50-$100mm
9
7
6
5
4
6
16
Actual
$50-$100mm
*
Published
$100-$200mm
9
7
5
5
4
6
16
Actual
$100-$200mm
7
5
4
3
3
6
10
Published
>$200mm
9
6
4
4
3
5
16
Actual
>$200mm
4
3
2
1
1
2
17
10th percentile
25th percentile
Median
75th percentile
90th percentile
Average
# of observations
U.S. Large Cap Equity - Passive

Published
Actual
Published
<$25mm
<$25mm
$25-$50mm
10
10
9
8
8
8
8
5
7
5
4
5
5
3
5
7
7
7
16
15
16
Actual
$25-$50mm
10
8
6
5
3
6
8*
Published
$50-$100mm
9
7
6
5
4
6
16
Actual
$50-$100mm
*
Published
$100-$200mm
9
7
5
5
4
6
16
Actual
$100-$200mm
7
5
4
3
3
6
10
Published
>$200mm
9
6
4
4
3
5
16
Actual
>$200mm
4
3
2
1
1
2
17
10th percentile
25th percentile
Median
75th percentile
90th percentile
Average
# of observations
Non-U.S. Equity - Passive

Published
Actual
<$25mm
<$25mm
16
17
15
15
14
14
12
6
10
3
13
11
12
6*
Actual
$25-$50mm
*
Published
$50-$100mm
15
13
12
11
9
12
12
Actual
$50-$100mm
*
Published
$100-$200mm
15
13
12
10
9
12
12
Actual
$100-$200mm
*
Published
>$200mm
12
11
10
8
7
10
12
Actual
>$200mm
9
5
4
3
1
4
14
10th percentile
U.S. Broad Fixed Income - Passive

Published
Actual
Published
<$25mm
<$25mm
$25-$50mm
10
*
10
Actual
$25-$50mm
*
Published
$50-$100mm
10
Actual
$50-$100mm
*
Published
$100-$200mm
10
Actual
$100-$200mm
*
Published
>$200mm
9
Actual
>$200mm
6
Published
$25-$50mm
16
15
14
12
10
13
12
25th percentile
Median
75th percentile
90th percentile
Average
15
15
15
15
15
8*
# of observations
51
10th percentile
25th percentile
Median
75th percentile
90th percentile
Average
# of observations
Real Estate - Published Fees

<$25mm
<$25mm
$25-$50mm
Core Open-End
Value-Added Core Open-End
109
150
100
100
125
97
95
110
88
83
100
82
66
58
60
89
109
85
22
29
22
$25-$50mm
$50-$100mm
150
100
125
94
110
86
100
80
58
60
107
83
29
22
$50-$100mm $100-$200mm
150
100
125
90
110
85
100
79
58
60
107
81
29
22
$100-$200mm
>$200mm
150
100
125
86
100
85
100
70
58
60
104
79
29
22
10th percentile
25th percentile
Median
75th percentile
90th percentile
Average
# of observations
REITs - Published Fees

<$25mm
<$25mm
Separate Acct.
Commingled
84
87
80
85
77
75
70
70
65
70
75
78
24
13
$25-$50mm
Commingled
84
80
75
70
66
75
12
$50-$100mm
Commingled
75
75
71
69
60
71
12
$100-$200mm
Commingled
75
74
69
67
61
70
11
$25-$50mm
Separate Acct.
80
80
75
65
63
73
24
Private Equity
10th percentile
25th percentile
Median
75th percentile
90th percentile
Average
# of observations
Separate Acct.
133
100
77
63
48
88
7*
Fund-of-Funds
155
110
100
100
87
108
13
$50-$100mm
Separate Acct.
79
75
71
64
58
68
24
$100-$200mm
Separate Acct.
76
70
64
59
53
64
21
>$200mm
Separate Acct.
76
69
63
58
52
63
21
>$200mm
Value-Added
142
125
100
85
58
102
29
Actual Fees
All Account Sizes
Core Open-Ended
91
84
68
58
50
70
14
>$200mm
Separate Acct.
75
74
69
66
60
69
11
Actual Fees
All Account Sizes
Commingled
82
69
62
48
40
60
10
Hedge Fund-of-Funds
With Performance
No Performance
Incentive Fees
Incentive Fees
100
11%
149
100
10%
130
88
10%
105
76
10%
100
48
10%
84
81
11%
114
10
10
13
* Note the small sample size.
52
About Callan
Callan was founded as an employee-owned investment consulting firm in 1973. Ever since, we have empowered institutional
clients with creative, customized investment solutions that are uniquely backed by proprietary research, exclusive data,
ongoing education and decision support. Today, Callan advises on more than $1.8 trillion in total assets, which makes us
among the largest independently owned investment consulting firms in the U.S. We use a client-focused consulting model to
serve public and private pension plan sponsors, endowments, foundations, operating funds, smaller investment consulting
firms, investment managers, and financial intermediaries. For more information, please visit www.callan.com.
About the Callan Investments Institute
The Callan Investments Institute, established in 1980, is a source of continuing education for those in the institutional
investment community. The Institute conducts conferences and workshops and provides published research, surveys,
and newsletters. The Institute strives to present the most timely and relevant research and education available so our
clients and our associates stay abreast of important trends in the investments industry.
For more information about this report, please contact:
Your Callan consultant or Anna West at westa@callan.com
2014 Callan Associates Inc.
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www.callan.com

2014 Investment Management Fee Survey: U.S. Institutional Fund Sponsors and Investment Managers

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CALLAN

2014 Investment Management

Knowledge. Experience. Integrity.

Respondent Group Profile

Total Fund Level Fees

Investment Manager Published Fee Reviews and Alterations

Fund Sponsor Fee Reviews

Published Versus Actual Fees by Asset Class

Future Manager and Product Changes

Perception of Value-Added Justifying Fees

Top Fee Concerns

Appendix I: 2013 Published Fees for Additional Asset Classes

Appendix II: 2011 Published and Actual Fees by Asset Class

2014 Investment Management Fee Survey

Knowledge. Experience. Integrity.

2014 Investment Management Fee Survey

Executive Summary (continued)

Fund sponsor respondents pay

Funds managers are paid

Mandates awarded in the past

Knowledge. Experience. Integrity.

2014 Investment Management Fee Survey

Respondent Group Profile: Fund Sponsors

Management Fee Survey. Responses are supplemented by

Database (overlap eliminated).

up about one-third of respondents (34%), and 14% are

We divide respondent funds into five groups by size:

19% have assets between $2 and $5 billion

> $15 bn 19%

The fund sponsor respondent group is skewed toward larger

funds have less than $1 billion in assets. The majority of

internally, on average 95% of assets are managed externally.

Knowledge. Experience. Integrity.

2014 Investment Management Fee Survey

Respondent Group Profile: Investment Managers

Survey results incorporate responses from 211 investment

The majority of respondents identified themselves as

investment managers (75%) and 17% indicated they are

registered investment advisors. Firms classified as other

($15 trillion in combined assets)

Respondents are diversified by size based on total assets

percent manage less than $5 billion while 30% manage

respondent assets under management. U.S. equity styles

By Assets Under Management

liquidity, multi-assets, outsourced CIO, futures and options,

currency, and other various strategies.

Knowledge. Experience. Integrity.

and alternatives (including real estate) 9%. Other includes

Nearly all of respondent assets (96%) are actively managed.

Large Cap 11.7%

2014 Investment Management Fee Survey

Total Fund Level Fees

The bar charts represent overall investment management

Investment Management Fees

in investment management fees in 2013, representing a

average has climbed. The range between funds that paid

dramatically and the difference between the median and

These statistics point to larger differences in invest-

is notably wide, highlighting a larger trend of divergence

Correlations: Investment Management Fees

*Multiple responses allowed.

Knowledge. Experience. Integrity.

2014 Investment Management Fee Survey

Fees by Fund Type and Size