Absolute return bond asset managers charging lower fees deliver better value for money,
according to a new report by ClearGlass, the investment cost transparency data provider.

ClearGlass reached its conclusion after assessing deal-specific fee data collected via the Cost Transparency Initiative (CTI) framework, which was set up in 2020 by the Pensions and Lifetime Savings Association, the Investment Association, and the Local Government Pension Scheme Advisory Board.

Using information comprising 31 asset managers, alongside 115 pension scheme clients, across a total of 361 mandates, the company has identified the top 20 per cent of asset managers providing the best value for money for their clients in the absolute return bond asset class.

Based on its rankings, ClearGlass has determined that there is no performance premium within the asset class and that institutional investors do not get the benefit of better performance by paying more in fees.

Crucially, the best-performing absolute return bond managers charge some of the lowest fees when compared with their peers.

The report also noted that investors can achieve greater economies of scale by increasing the size of their allocations.

It stated that public factsheet data suggested ongoing charges increase in correlation with allocation sizes. But data from the CTI framework shows that the opposite is, in fact, true.
In addition, ClearGlass believes that consultants only capture half of the difference between public and CTI framework ongoing charges.

ClearGlass research director, Christopher Sier, said that the implications of the difference in fee levels from data collected from public sources and consultant sources, versus those that are deal and client-specific, are "profound".

"Unfortunately, the absence of publicly available accurate data has, up to this point, substantially distorted the market for absolute return bond funds as public data remains unreliable and off the mark," said Sier.

"Investors and good-value-for-money asset managers would benefit greatly from the transparency that CTI data offers.”

The report names two managers, BlueBay Asset Management and US-based REAMS Asset Management, as having both ranked in the highest quartile for costs and performance.

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