Fund manager fee disparity questioned

The newly announced fee and levy regime, which applies from August, will charge fund managers a flat fee based on which band of funds under management they are in .

Those with under $20 million will pay $2000 per year, while those between $20 million and $50 million will pay $10,000, rising to $20,000 for managers with $50 million to $100 million and $40,000 for those with $100 million to $500 million.

Managers with $500 million to $1 billion will be charged $60,000, those with $1 billion to $2 billion will pay $80,000 and those with over $2 billion will pay the maximum rate of $100,000 per year.

However, while the big guys pay more, the fees are relatively much more expensive for the little guys, according to Pathfinder Asset Management executive director John Berry.

"We have no problem at all with fund managers being levied by the FMA, but we believe the fee structure should be a fixed basis point charge of funds under management," he said.

He has calculated that managers with just above $20 million will be hit hardest, with the fee representing 0.05% of funds under management, 12.5 times what those on exactly $2 billion under management (0.004%) will pay.

"This is skewed, favouring the large managers," Berry said. "Whilst at first glance they may not seem like enormous dollar amounts faced by boutiques, they are meaningful to us - as is the principle of fairness."

However, the owners of the big fund management firms won't be getting off lightly.

Big banks also face annual charges of $350,000 per year (for total assets exceeding $50 billion), while insurance companies will be charged as much as $150,000 per year (for annual gross premium revenue of more than $250 million).

Comments from our readers

On 8 June 2012 at 9:59 am Fred said:

John raises an excellent point. Regulators often have the effect of stiffling innovation.
Many of the industry problems do lie with institutions: ANZ & the DYF/RYF fiasco; ASB and rogue traders; Perpetual & dodgy funds.
Kiwis need to be better than ordinary to catch up.

On 8 June 2012 at 11:55 am Anthony Edmonds said:

I agree John - this is skewed in favour of the large players.

While I am wrapped that our funds under management have grown by around $180 million this year, I suddenly find that potentially we have to pay the FMA $40,000 per annum (which is roughly 0.02% per annum). This is a bigger cost for us than things like audit and insurance.

I guess the simple answer will be to grow big! Righto - back to sales.......

On 8 June 2012 at 12:04 pm John Mark II said:

Come on - what is the complaining about. It looks cheap.

According to Morningstar AMP have 150 products in NZ. At the maximum fee of $100,000 this is roughly $667 a fund. Sounds cheap like chips to me.

Fund manager fee disparity questioned

A boutique fund manager has spoken out over the FMA’s fee structure that will see small players pay as much as 12 times more per dollar under management than their bigger counterparts.

Friday, June 8th 2012, 7:33AM 3 Comments

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