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Seven Investment Management has called for a "big bang" in the UK asset management universe to broaden choice and cut costs for investors.

Justin Urquhart Stewart, marketing director at 7IM, argued the actively managed UK funds industry should open up to the benefits of competition, just as the UK removed restrictions on foreign brokerages in the 1980s.

"We're going to have to go through a big bang of investment firms," he said.

He maintained active portfolios were suffering against products that track a benchmark, partly because the latter were less costly to run.

"Most of them have trouble reaching their benchmark, let alone beating it. You would think they would be getting cheaper, but they're getting more expensive.

"What has happened is people have built up a cost base over time. People have got used to charging these fees, and demand hasn't gone down enough. There's not enough pain yet."

On the contrary, he observed many AMCs were rising from 1.5 to 1.75 per cent on non-alternative, single-manager retail funds. In October First State Investments made exactly this change to the retail shares on its £858.3m Asia Pacific and £181.2m Greater China Growth products.

Mr Urquhart Stewart added TER, stamp duty and trading costs were not necessarily transparent to investors as some of them were commonly just featured in annual reports.

"Who looks at an annual report of a fund? The private investor wouldn't have a clue. You'd hope for them to go down and be more openly disclosed."

He argued a cost-cutting trend might force firms to outsource portfolio management and administration overseas, including to emerging markets such as Dubai. "I wouldn't be at all surprised. These days, the skill is eminently portable around the world.

"Do I want a star manager, or am I after someone who's going to be in the right asset classes once I've got over the idea it's someone I haven't heard of?"

Ed Moisson, director of fiduciary operations, Europe, at Lipper, spoke more cautiously about the potential for reducing costs. "The trend we have seen is rising management fees and TERs, and we don't see that changing.

"It's partly due to the success fund management companies have had justifying those fee rises. They might say there are more costs they have to deal with for a fund with a longer track record, for instance. The impact of more funds coming into the market has a cumulative effect on the average."

But Mr Moisson said investors were, if anything, more aware of fees than they used to be. "TERs are now much more readily available."

He believed downward pressure on fees was more likely to be created by competition from actively managed offshore products rather than low-cost products that track a benchmark such as ETFs, partly because ETFs do not generally pay trail commission to advisers.