Fees should not be the driving force behind investment decision-making, but they are an important factor. In this article we outline which strategies should theoretically get the best alpha per unit of fees.
So you've decided to pursue an alpha program. But with a seemingly relentless drive to reduce costs, how should an investor go about getting the most bang for their buck? We believe that there are the three key strategies for spending your fee budget wisely.
Investors should consider three important principles when considering which public market opportunities have the most potential:
In equity markets, all of the sub-asset classes that we examined over a 10-year period achieved positive outperformance at the median manager level. However, when a typical fee hurdle is taken into account, four of the sub-asset classes underperformed the benchmark, falling to a “low” ranking in terms of their alpha per unit of fee. The situation is similar in fixed income.