MACQUARIE Group is facing a backlash from fund managers following its decision to more than double the annual fees it charges managers to distribute their products on its investment platform. Macquarie has made the move despite fees across the industry generally falling.
Fund managers have warned they may have 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 fund product. Financial planners use platforms for ease of management of clients' investment portfolios. About $400 billion in superannuation funds are sitting on platforms.
From August, Macquarie plans to lift the $9000 annual fee it charges fund managers to $20,000. As well, the fee to list each investment product will rise from $4000 to as much as $7150.
Maxim Asset Management director Winston Sammut said there was no justification for the fee increase. He has pulled his fund from the Macquarie platform.
"You've basically got to pay up to stay on board," he said. "I've made the decision to go somewhere else."
While small managers will feel the pain of the fee increase most, bigger managers will also be caught out because they often have a dozens 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 second 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," the manager said.
A Macquarie spokeswoman said the fee overhaul reflected the addition of new services. The operational costs of the Macquarie platform had also 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," the spokeswoman said.
With more than $24.2 billion in funds under administration, Macquarie is the sixth-biggest platform operator, behind each of the big four banks and 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 a major investment in its wealth-management businesses and the management of assets on behalf of superannuation funds.