Interview regarding “Bundled Fees”

FundFire, by Aziza Kasumov

Bundled fees are becoming somewhat obsolete.  We are seeing them less frequently and more as a shorthand in discussions during the early stages of an OCIO search.  As OCIO clients focus on obtaining greater price transparency, we are helping them obtain and properly evaluate each of the component parts of total fees.  

With bundled fees, you have an inherent conflict in that any price concessions obtained from underlying managers, may not be passed on fully to the client.  These price concessions typically are due to economies of scale and the buying power of an OCIO. Moreover, allocations might be influenced to go to the manager charging a lower fee.

We believe there are times where it is prudent to pay more for better managers, better access, or to obtain a better portfolio.  As Investment Committee members become more sophisticated, they are using the growing transparency to better negotiate appropriate fee levels. (6/29/19)