Unpalatably high fund management fees which are often cited as a barrier to private market investing are starting to fall but research reveals complex charging structures and poor transparency may prevent investors from capitalising on compression.
The bfinance Fee and Cost Insight report reveals the near two-decade decline in public market fees since the global financial crisis may be broadening to the wider investment management industry.
The consultancy reports that in a poll of 84 limited partners (LPs) across 20 countries, more than two thirds of respondents report “significant” or “moderate” fee reductions in comparable direct lending strategies during the past three years.
Meanwhile, nearly half of respondents note “significant” or “moderate” fee reductions in infrastructure and real estate, followed by 39 per cent who observe fee reductions in private equity.
The research found European high yield credit separately managed accounts for a USD100 million mandate compressed from 34bps in 2020-22 to just 30bps in 2025-26, while the upper quartile fee level dropped from 40bps to 35bps.
However, looking to other expenses beyond fees, the data is more complex.
Just 25 to 30 per cent of investors see additional costs coming down, while around 15 per cent say they are increasing. Bfinance suggests that the latter number could be considerably higher, since evidence shows limited investor visibility on the complex cost picture
Kieren Bussey, Senior Associate for Portfolio Solutions at bfinance, says: “Private markets are experiencing a growing divergence between stated fees and actual fees available to investors. Managers are increasingly using discounts, fee holidays, first-close incentives and other mechanisms that may not be visible in benchmarking data. In many cases, real pricing is moving faster than formal fee schedules suggest.”
Bussey adds that cost benchmarking in private markets remains problematic, noting that structural complexity such as carry, hurdle rates, offsets, rebates, step-downs, expense arrangements and other aspects that obstruct comparison.
Further, the widespread use of non-disclosure restrictions that can inhibit even anonymous, non-attributable disclosures for benchmarking purposes presents another obstacle.
“Restrictions have historically been underpinned by two arguments. First, the idea that fees in private markets are not a price tag but a distinctive and core protectable aspect of a firm’s business model, and second, the historic inaccessibility of strategies to retail clients and the consequent lower perceived need for investor protection,” Bussey says.
He continues: “Both arguments appear somewhat less conclusive today. Transparency initiatives such as the ILPA template [Institutional Limited Partners Association efforts to enhance global standardisation and transparency in private capital firms] have typically been directed toward the visibility that a general partner offers to an LP, rather than helping investors to understand competitor costs. While consistent cost reporting can theoretically facilitate competitor comparisons, the two subjects are distinct.”
Olivier Cassin, Managing Director at bfinance, says opacity is a major barrier to investors hoping to capitalise, arguing that complex frameworks and limited disclosure can obscure true costs.
He said: “The conversation is no longer simply about whether fees are falling. The more important question is who is benefiting, where the real savings are occurring, and whether investors have the visibility needed to assess value for money. As pricing structures become more complex, robust benchmarking and governance remain critical.”
