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French (Canada) - Dutch Private Pension Scheme
- 2021
- Portfolio Solutions
- EUR9 billion
- Fee Review
Our specialist says:
We always urge clients to pursue greater value within their mandates—even when the need might not be obvious—and our approach really delivered here. Working efficiently with the client allowed us to move quickly from initial analysis to negotiation and resolution, securing improved fees and terms in less than three months. Obviously, the sooner we’re able to get better fees, the sooner the client starts to benefit, and this was a great example of how fast we can deliver. Our approach allowed us to secure cost savings across the entire portfolio—including both active and passive mandates—and we were even able to obtain fee reductions on some strongly performing active mandates that were soft-closed. As a result, our client can now look forward to saving nearly 20% on fees—equivalent to almost EUR3 million per annum—and benefitting from more productive working relationships with its managers.
Engagement at a glance
This client, a Dutch private pension scheme, asked bfinance to partner with its in-house investment team to assess the fees paid to its external asset managers and negotiate lower rates. The in-house team had established collaborative, long-term relationships with its external investment managers, necessitating a careful and diplomatic approach—but the focus on reducing fees was imperative given a changing regulatory context and renewed interest from internal stakeholders.
Client-Specific Concerns
The client was aware that it had not comprehensively renegotiated fees with its external investment managers for several years. Under pressure from internal stakeholders to achieve greater cost savings—and external pressure from changing regulatory dynamics—this Dutch asset owner sought bfinance’s assistance to conduct a thorough review of its external managers’ fee structures. The pension manager was intent on realising competitive market rates across all mandates within its EUR9 billion portfolio, which included both active and passive approaches to a diverse array of asset classes. The client was particularly concerned about assessing managers on a full value-for-money basis and ensuring that fees were justified instead of simplistically aiming to minimise costs across all assets.
Outcome of Fee Review
- Creating a bespoke peer benchmark for better analysis: as a first step, bfinance reviewed the client’s existing managers and selected suitable peer groups from within its own database for comparison on fees and performance metrics; this information was drawn from bfinance’s live asset manager tenders, new manager enquiries, bfinance’s own proprietary manager performance analysis and insights from its in-house research specialists. This exercise allowed the client to gauge the competitiveness of its current fee arrangements.
- Investigating the specific drivers of relative performance: to support the fee negotiations, bfinance assessed managers’ performance histories to gain insight into their track records relative to their benchmarks (including attribution of returns). This exercise included a careful review of the managers’ fee structures, such as a cash-plus-performance metric, to determine how the client was being charged.
- Incorporating client insights: bfinance interviewed members of the client’s portfolio management team to gain insight into their relationships with the asset owner’s external investment managers; this approach encouraged open dialogue and frank communication about the client’s level of satisfaction with different managers, which informed the subsequent negotiations.
- Taking ownership of the negotiations: in managing the fee review and negotiation process from start to finish, bfinance conducted multiple meetings with external investment managers and assessed their proposed fee offerings. The bfinance team continued these discussions until a satisfactory outcome was reached. This level of engagement allowed the client to present a united front with bfinance, which handled the heavy workload inherent to the review process while remaining independent of the actual negotiations. As a result, bfinance was able to maximise its influence as an objective advisor.
- Holding the line on fees: by establishing a close working partnership with the client, bfinance was able to push back on managers’ initial offers and extend discussions until managers’ fee packages reflected truly competitive market rates. The client was thus able to achieve total fee savings of approximately 20% across the portfolio and maintain the strong, collaborative working relationships it had fostered over a number of years.
