SEI Finds UK Charity Sector Could Overpay for Investment Management

SEI’s (NASDAQ:SEIC) Institutional Business in the U.K. announced today that a review of public data on fees in the charity sector has revealed that charitable foundations in the U.K. could be overpaying significantly for investment management fees when compared to other institutional investors. The analysis demonstrates that the charity sector could save between £250 million and £288 million overall by switching to a different investment management model, such as the OCIO approach commonly employed by global pension schemes and U.S. endowments.
When considering fees, SEI’s analysis applied a multi-faceted approach, which included evaluation of financial statements, analysis of the largest charity trusts’ fees, and the review of fees associated with the fund-of-funds structures commonly offered by wealth managers. The average fee paid in these cases is likely to be higher than fees for an equivalent strategic asset allocation in an OCIO model that combines advice and implementation. In addition to cost savings, charities could also benefit from the multi-sector experience boasted by the OCIO strategy. A move to this investment approach could also provide charities with the opportunity to benefit from timely asset allocation, manager selection and replacement decisions, professional advice and economies of scale.
Commenting on the research, Pradeep Kachhala, Director UK Charities, SEI Institutional Group, said:
“Demands on U.K. charities and their trustees are at an all-time high, and these demands are likely to grow as public spending continues to fall and the regulatory burden increases. It is concerning that the charity sector could be significantly overpaying for investment management services, and our analysis demonstrates that a renewed focus is needed. This notion supports one of the key tenets of the Charity Commission’s CC14, which recommends that trustees consider the costs of a manager or adviser. Trustee boards should consider alternative models that could ease their governance burden, as well as provide economies of scale that potentially reduce costs.”