AMWatch

Thematic funds stay clear of worst industry-wide fee pressure - at least for now

Thematic funds enjoy relative ease from fee pressure compared to traditional global equity funds, and this is likely to continue after a strong year for theme-based strategies. But investors will probably need to adjust return expectations as many stocks in popular themes already price in more growth than can realistically be achieved.

(Left) Brett Pybus, head of iShares EMEA Investment and Product Strategy and Alex Tedder, CIO of global and thematic equities at Schroders. | Photo: PR / Blackrock and Schroders

It is no secret that investment managers are battling with a downward fee pressure on their investment funds. In the UK, for example, average fees for actively-managed equity funds have dropped by 16 percent between 2012 and 2019. For passive vehicles, the average price has been sliced in half, according to an analysis by Morningstar.

One fund category, however, that, at least so far, has been fairly unfazed by this development is thematic funds. According to senior fund analyst at the Chicago-based investment consultancy Kenneth Lamont, investors pay 14.3 percent more in average ongoing charge for a thematic fund compared to a traditional global large-cap fund. The corresponding thematic premium for passive funds is 25 percent.

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