Across the global fund industry, it is widely accepted that asset managers are facing increased pressure to reduce fees on their products. While this fee compression is generally seen as beneficial for investors, allowing more investment dollars to be put to work, the impact on asset managers is more complex. To fully understand the drivers of fee compression, we have looked at four areas:

1. The Pivot to Passive – How the growth of passive products in both funds and ETFs impacts pricing of all product types.
2. Industry Concentration – As the largest asset managers continue to grow and deliver extraordinary scale to investors the nature of competition is being redefined.
3. Share Class Pricing and The Shift to Clean – RDR and Reg BI have driven investors to clean share classes in the UK and US, — what can we expect in Ireland and Luxembourg?
4. Regulation – Regulation in the UK has shaped fees over the past decade and has had indirect impacts in other markets; we investigate the impact of regulation on costs and its influence on the viability of asset managers.

Key findings from this report include:

• Fee pressure: UK and US fees are likely at their lowest, while fees in Ireland and Luxembourg could fall further, depending on the Retail Investment Strategy.
• Advice costs: The EU may continue permitting fund expenses for advice, in contrast to the UK and US, which favour cleaner share classes.
• ETF trends: European passive ETF fees could drop, especially if asset managers adopt US-style low-cost models.
• Industry consolidation: Large asset managers are expected to maintain stable fees, while mid- to small-sized managers must focus on cost efficiency to stay competitive.
• Rising fees in niche areas: Some active ETFs and private investment access may see a slight rise in fees due to specific investment mandates.