Average fees paid to directors of investment funds in Luxembourg and Ireland are down significantly when compared to last year in what appears to be a reflection of a shift in the way that funds reimburse their directors, according to a new report issued on Monday.
The average director fee has declined 16 percent to 34,751 euro, tracking an overall decline also in the average assets under management for funds, said London-based research firm Fitz Partners, based on an assessment of 170 investment funds in Luxembourg and Ireland, Europe’s two leading investment fund domiciles.
“The scale of the decrease in directors’ fees when comparing the same boards from one year to another is striking,” said Hugues Gillibert, Fitz Partners’ CEO. “It suggests that there is a shift in the way funds are approaching director fees. Similar to funds costs, these would be under pressure too.”
Several studies published recently have found that costs of investment funds are, in general, declining. A Fitz Partners study last month found that about two thirds of the investment funds that changed their fees opted for lower charges, while one third increased its costs. Investors in Ucits investments fund are paying about 1/5 less in operational charges after a decade-long reduction in such fees, according to another report, by ICI Global.
Directors’ fees refer to the compensation paid by the fund to board members. Fitz Partners found that these fees vary widely depending on factors such as the size and complexity of the funds or the number of directors present on each board. The research also observed significant variation in director fees from one board to another.
Correlated with assets
The research found a direct correlation between the average fee charged per director and the average assets under management. Fitz Partners’ found that as average fund assets increase, the average fee per director also increases. Additionally, the research also revealed that the average fee per director increases as the number of products under the umbrella increases.
“The absence of a unique directors fee market rate illustrates the differences found in Board composition and the wide range of umbrella funds in terms of assets, number of funds or type of fund products,” said Gillibert in a statement. “It is reassuring that instead of applying one rate when it comes to directors’ fees, funds would instead set compensations on directors’ level of expertise and volume of work expected from those directors.”
The more, the merrier
