Charities paid £686m in investment management and advice fees in the past year, according to research from Tribe Impact Capital.
The research was carried out in September 2020 and analysed the accounts of 169,000 charities filed with the Charity Commission. It focused on charities with investment portfolios of £1m and above.
Tribe, which claims to be the UK’s first dedicated impact investment wealth manager, also found that charities were, on average, paying fees that represent 0.7% of the value of their investments.
However, fee rates varied depending on portfolio size, with the research finding that charities with £1m to £3m in investments pay, an average 1.11%. At the other end of the scale, charities with £100m or more to invest pay 0.44%.
Fee transparency concerns
In the Charity Finance Fund Management Survey 2020, a number of charities raised concerns over the transparency of investment fees.
Even after MiFID 2, a piece of EU legislation that aimed to provide greater protection to investors and increase transparency, “fees are still not very transparent,” according to one charity respondent said. “The hidden transaction charges are still not that clear,” they said.
Another cited “inconsistencies where there are underlying funds rather than direct holdings”.
“Greater consistency in the interpretation of the rules by different firms, and greater guidance on the information provided on – for example – tracking error, would be helpful,” they said.
One respondent suggested: “Full transparency would be for managers to pay gross and invoice for fees.”
Despite these concerns, satisfaction levels remain high, with 65% of respondents saying they are “very satisfied” with their fund manager and 32% saying they are “quite satisfied”. This compares with 41% and 56% respectively in the 2019 survey.