ESG managed fund fees revealed

ESG equities managed funds are cheaper than non-ESG equities funds, according to the latest Rainmaker Information research into wholesale managed fund fees.

A review of fees charged by 76 ESG managed funds found they charged an average 0.8% pa, being about the same as regular funds. But ESG equities managed funds were found to be about one-third cheaper than non-ESG funds, according to findings from Rainmaker Information's Wholesale Advantage Report.

The report also found that there was no significant relationship between a product's funds under management and the fees it charges, nor was there a relationship between minimum investment and fees charged.

"Despite a common assumption that larger products offer scale benefits to investors, managed funds designed for larger investments do not, as a rule, offer reduced fees," said Alex Dunnin, executive director of research and compliance at Rainmaker Information.

"Investment managers will offer high-end customers lower fees, but customers usually have to negotiate these fee reductions case-by-case or choose an indexed fund."

The report analysed more than 1,000 wholesale managed funds, a market with $588 billion in funds under management (FUM).

Wholesale managed funds charged average fees of 0.77% p.a. in 2020, resulting in $4.5 billion in fee revenue, Rainmaker information found.

Average fees are down from 0.83% p.a. in 2019, which coincides with fee reductions for superannuation products as previously announced in Rainmaker's Superannuation Benchmarking Report.

While the percentage fee rates are down 6%, fee revenue is down 4%. This is due to the lower fees applying to higher FUM as the market grew during the year.

Alternatives was found to be the most expensive asset class, with international equities being the second most expensive asset class and property as the third most expensive class.

The same report also found that ESG exchange traded funds (ETFs) are rising up the ranks in terms of assets under management. Two of BetaShares' ESG ETFs appear in the list of the top 30 ETFs by AUM - the BetaShares Global Sustainability Leaders ETF, which had $8849 million in AUM as of September 2020 is the 21st largest ETF, while the BetaShares Australian Sustainability leaders ETF had $647 million in AUM, making it the 26th largest ETF.

Vanguard's Australian Shares Index was the largest ETF, with $5.748 billion in AUM.

Last week, sister publication Financial Standard reported that the Australasian sustainable funds sector reported a record $1.8 billion of inflows throughout the December quarter.

Morningstar's latest Sustainable Investing Landscape for Australian Fund Investors revealed AMP Capital, Pendal and Perpetual struggled to capture flows into their sustainable strategies.

Read more: ESGRainmaker InformationAlex DunninBetaShares Australian Sustainability Leaders ETFBetaShares Global Sustainability Leaders ETFFinancial StandardSuperannuation Benchmarking ReportVanguard
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