ICI: Portfolio Fees About Level With Funds, Public Plans

November 4, 2003 (PLANSPONSOR.com) - Mutual funds and public pension plans pay about the same for external management of their portfolios, according to research by a fund industry group.

The Investment Company Institute (ICI) compared the portfolio management fees generated by public pensions with portfolio management expenses of funds that are subadvised, a comparison which ICI claimed was better than a more direct approach used in a 2001 study.

Its results, according to ICI: public pension funds pay an average 28 basis points while subadvised mutual funds pay 31 basis points.

Although the 2001 study found that funds pay substantially more for portfolio management than pension plans, ICI argued that a fund’s management fee actually covers more than just investing decisions. Therefore, ICI’ said its suggested public pension fees versus subadvised fund fees provided a more legitimate “apples to apples” examination.

For example, ICI pointed out that fund subadvisory fees are separately reported and therefore easier to compare with public fund advisory fee data.

For more information, go to  http://www.ici.org/pdf/fm-v12n5.pdf .