Nomura cuts fund management fees under pressure to stay competitive
Nomura Asset Management is set to reduce investment management fees across a number of its global and emerging markets funds, as investors display caution towards the funds market in the wake of the coronavirus crisis.
Nomura’s Global Sustainable Equity Fund will see the biggest cuts, with fees for Class A shares to fall to 1.2 per cent from a previous 1.5 per cent. Nomura is also launching a new class of ‘founders fee’ (F) shares for this and other funds, with management fees of 0.1 per cent per annum, which will be available until the fund reaches USD150 million in AUM.
“Reducing the investment management fees reinforces our ongoing commitment to providing competitive, fair and transparent charges to our clients,” says Peter Ball, managing director at Nomura Asset Management UK.
Nomura’s India Equity Fund, Japan High Conviction Fund, Asia Ex Japan High Conviction Fund, Global High Conviction Fund, Asia High Yield Bond Fund, and the Emerging Market Local Currency Debt Fund will also command lower fees, saving investors up to 0.25 per cent compared to previous rates.
Most asset managers expect continued pressure to reduce their management fees for ten years or more, with regulators, institutional clients, and competitors driving a race to the bottom, according to a survey by consultancy Alpha FMC in June.
“Recent high-profile examples of managers receiving significant management fees whilst delivering poor performance has exacerbated attention on fees. Pressure has grown for managers to better align incentives with customers and pass on economies of scale. The latter can be achieved with relative ease, but there remains a significant challenge in agreeing how best to align incentives, in addition to the operational complexity of delivering novel fee models,” said the consultancy's executive director Joe Docker, when the survey was published.
Sixty per cent of the asset managers surveyed believed downward pressure on fees to continue, saying that traditional asset classes such as mature equities, and government and corporate bonds would be under the most pressure.
Nomura’s fee cuts will take effect from 1 July 2020, and founders fee shares will be available for Asia Ex Japan High Conviction Fund, Asia High Yield Bond Fund, Asia Investment Grade Bond Fund, Emerging Markets Local Currency Debt, Global High Conviction Fund, Global Multi Theme, and the Global Sustainable Equity Fund.
Ball maintains: “Despite the current market environment, we made significant progress in attracting allocations from both domestic and overseas investors. For example, our Global Dynamic Bond fund has grown by USD1 billion in the last 10 months.”
"Fund buyers would expect Nomura to be a leader in Japan Equities and we are. Our Japan High Conviction fund has outperformed TOPIX by 10.76 per cent YTD as well as 7.78 per cent pa over three years, showing it is coping well with today’s unpredictable environment.
“Additionally, our Global Dynamic Bond fund was one of the very top performers in 2018 and 2019, under the leadership of award-winning fund manager Dickie Hodges, and despite the market turbulence the fund has returned 2.34 per cent YTD as well. This is proven to be an all-weather fund for fixed income investors, performing in good and difficult markets alike.”