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2013 Business Expense Benchmark Survey
The APAC “Discount” for Running a Fund
The opposite pattern was evident in reviewing APAC funds in our dataset, where the management
company expenses were consistently lower than for similarly sized U.S. and European firms. Survey
respondents from this region were confined to smaller-sized firms in the $100 million, $500 million
and $1.5 billion AUM bands. We did not receive any results from APAC firms in the higher AUM bands;
yet, in each instance, these APAC firms were being run at a substantial discount to similarly sized U.S.
and European firms.
Chart 28 shows the results for managers with $100
million AUM. Across our sample of managers at this
size, the average management company expenses for
U.S. firms amounted to $1.92 million versus $2.18 for
European firms. The mean of these two figures was
$2.04 million. This compares to $1.46 million in costs
for APAC firms—a figure 28% below the mean.
To understand why costs for APAC funds were so much
lower, we took the mean spend per category across our
management company expenses and compared how
much they varied across regions. The results of this
analysis are highlighted in Chart 29.
As shown, there is very little differentiation in the
amounts being spent across regions in terms of
operations and technology, where expenditures by
APAC funds with $100 million AUM were almost exactly
on mean. Nor was there much difference in terms of risk
and compliance, where the same pattern held true. A
slightly more noticeable difference was registered on
spend for business management, where APAC funds
had expenses 13% below the mean.
Marketing was the area where the largest variation in
spending between regions was registered. As already
discussed, $100 million AUM European firms have
extremely high marketing costs when compared to their
U.S. counterparts, but these costs were only slightly less
pronounced when viewed against the APAC funds. In
total, APAC funds spent $232,137 on marketing across
personnel and third-party expenses versus $182,136 in
the U.S. and $549,587 in Europe.
The size of the APAC discount grows, however, when
firms with $500 million AUM are considered. This is
shown in Chart 30.
As was previously the case, the total spend by firms
in Europe was higher for managers at this size than
for either the U.S. or APAC. In the U.S., managers with
$500 million AUM spent an average of $3.2 million
for their management company expenses, excluding
investment management costs. In Europe, the figure was
substantially higher, at $4.4 million. The mean between
these two regions was $3.8 million, a total that was 42%
higher than the $2.2 million being spent in APAC.
Differences in headcount between the regions offer little
explanation as to why it costs less in APAC. The average
$500 million AUM APAC fund has 18.5 heads, of which
9.8 are focused outside investment management. This
compares to a total of 15.8 heads in the U.S., 8.1 of which
are outside investment management and to a total of
20.0 heads in Europe, 11.0 of which are focused outside
investment management.
The average compensation being realized across these
regions has much more to do with the cheaper APAC
expense load. Across their investment support and
business management headcount, $500 million AUM
firms in APAC pay on average only $115,492 per person
versus $224,287 in the U.S. and $224,254 in emerging
markets in Europe and Asia (EMEA).
Chart 28: Relative Management
Company Expenses: $100 Million Fund
(Excluding Investment Management)
0
$500K
$1M
$1.5M
$2M
$2.5M
38%
US
EMEA
APAC
$1.92M $2.18M
$1.63M
$2.05M
-20%
Source: Citi Prime Finance. U.S. data set reflects 20 firms with $2.3. billion AUM.
EMEA data set reflects 13 firms with total AUM of $1.2 billion.
APAC data set reflects 12 firms with total AUM of $1.2 billion