MACQUARIE GROUP is facing a backlash from fund managers following its decision to more than double the annual fees it charges to distribute their products on its investment platform.
The increase has come about despite fees across the industry falling generally. Fund managers have warned they could be forced to pass on the higher costs to investors in their funds, which is likely to further erode superannuation returns.
Investment platforms are the link, or "hub", in the chain between the consumer and the underlying fund product. Platforms are used by financial planners, given they can easily manage the investment portfolios of clients. They also provide a vehicle for fund managers to secure a slice of the $400 billion in superannuation funds that sits there.
From August, Macquarie plans to increase the annual fee it charges fund managers from $9000 to $20,000. At the same time, the fee to list each investment product will rise from $4000 to as much as $7150.
The director of Maxim Asset Management, Winston Sammut, said there was no justification for the fee increase, prompting him to pull his fund from the Macquarie platform.
"You've basically got to pay up to stay on board. I've made the decision to go somewhere else," he said.
While small managers will feel the pain of the rise in fees, most, bigger managers will also be caught out because they often have a dozen separate products listed on the platform, with each product attracting its own fee.
"Ultimately what it means is I've got to pass it on - so the end user will suffer," Mr Sammut said.
A Macquarie spokeswoman said the fee overhaul reflected the addition of new services, and the operational costs of the Macquarie platform had increased as it took on the regulatory and compliance costs on behalf of fund managers.
"We believe that our platform fees appropriately reflect the quality of our service and remain competitive within the market," she said.
With more than $24.2 billion in funds under administration, Macquarie is the sixth-biggest platform operator, behind the big four banks and the wealth specialist AMP.
Westpac is the biggest platform operator in the market, with a combined $84 billion on its BT Financial and Asgard products.
Since the financial crisis, Macquarie has curbed its higher-risk infrastructure deal-making to focus on businesses that give it annuity-style income. This extends to big investments in its wealth management businesses and the management of assets on behalf of superannuation funds.
A fund manager with a boutique fund said he was also reviewing his position with the Macquarie platform. "This is not the environment to be passing on higher costs to equity investors," he said.
Earlier this year, the Macquarie head of banking and financial services, Peter Maher, told an investor briefing the group intended to dabble in the premium end of the financial services market.
Frequently Asked Questions about this Article…
What is the Macquarie fee increase and when does it take effect?
Macquarie Group announced it will raise the annual fee it charges fund managers on its investment platform from $9,000 to $20,000, and increase the listing fee per product from $4,000 to as much as $7,150. The changes are due to take effect from August.
Why are fund managers upset about the Macquarie platform fee hike?
Fund managers say the fee more than doubles existing charges at a time when industry fees are generally falling. Some, including Maxim Asset Management’s director Winston Sammut, believe there is no justification for the rise and have pulled or are reviewing their funds on the Macquarie platform.
How could Macquarie’s higher platform fees affect everyday investors and superannuation returns?
Fund managers warn they may have to pass the higher platform and listing costs onto investors, which could further erode superannuation returns for end users if managers increase fees or reduce net returns to cover the platform charges.
Which types of fund managers will be hit hardest by the Macquarie fee changes?
Small boutique managers will feel the pain directly, but larger managers can also be affected because they often list multiple separate products on the platform and each product attracts its own listing fee, multiplying the cost impact.
What reason did Macquarie give for overhauling its platform fees?
A Macquarie spokeswoman said the fee overhaul reflects the addition of new services and higher operational, regulatory and compliance costs that the platform is taking on behalf of fund managers, and that the fees remain competitive in the market.
How large is Macquarie’s investment platform compared with other platform operators?
Macquarie has more than $24.2 billion in funds under administration and is the sixth-biggest platform operator, behind the big four banks and wealth specialist AMP. By comparison, Westpac’s combined BT Financial and Asgard products hold about $84 billion.
Are fund managers already responding to the fee increase on Macquarie’s platform?
Yes. Some fund managers have reacted by pulling their funds or reviewing their relationship with the Macquarie platform. Winston Sammut said he has moved his fund elsewhere, and other boutique managers are also reassessing whether to remain on the platform.
How does the fee increase fit into Macquarie’s broader business strategy?
Since the financial crisis, Macquarie has shifted away from higher‑risk deal‑making toward businesses that deliver annuity‑style income. That strategy includes investing in wealth management and managing assets for superannuation funds, and Macquarie has indicated an interest in the premium end of financial services.
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