Fees  

Fund groups snub FCA’s all-in fee proposal

Conversely, some managers may overestimate how much transaction costs are, resulting in a sharp increase in fees to the investor.

Meanwhile, the New City Initiative warned that bigger asset managers can leverage their purchasing power across the wider business, meaning the profits of smaller boutique groups could suffer a hit if an all-in fee is introduced.

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The New City Initiative also stated comparing active fee structures to their passive counterparts is “not intuitive”.

Mr Carter said: “The FCA’s targeting of active managers as being expensive or uncompetitive on fees fails to account for the fact that active managers are better disposed to deal with adverse conditions in a market downturn.”

He pointed out that many boutique firms tend to deliver better performance than their larger peers, but the smaller companies are seeing their cost margins go up at a rate which is unsustainable.

He added: “Fees at boutiques have to reflect the cost pressures of doing business.”

Dan Brocklebank, head of Orbis Investments UK, which oversees more than £15bn, said: “The FCA's fee proposals might provide more clarity and transparency but they don't fix the core problem."

He pointed to the FCA's criticism that the industry's prevailing fee model seems to fail to align the interests of consumers and fund managers.

Mr Brocklebank added: "We have always believed in pay for performance - to us, it seems common sense.

While he said no performance fee is perfect, he said a fee structure where a manager does not receive a fee unless it outperforms is the fairest and most transparent way to operate.

katherine.denham@ft.com