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Callan Study Provides Valuable Insights on Real Assets Fund Fees

On December 10, 2024, Callan, an influential institutional investment consulting firm, unveiled its inaugural 2024 Real Assets Open-End Funds Fees and Terms Study. The report evaluates 144 comprehensive real assets partnerships, representing diverse investment opportunities across real estate, infrastructure, farmland, and timberland.

Understanding the Study's Significance

The study highlights an important aspect of the investment landscape—the variety and complexity of options available for institutional investors. According to Aaron Quach, Vice President of Callan’s Real Assets Consulting group, "The vast number of open-end options in today's market, along with seemingly minor discrepancies in fees and terms, can have substantial repercussions for investors."

Key Findings from the Study

Callan’s analysis reveals numerous insights that could guide institutional investors:

• - The median management fee for core real estate equity funds stands at 96 basis points, calculated on a net asset value of $25 million.
• - Among the 144 funds analyzed, 55 impose a performance fee, with the majority adopting European waterfall structures.
• - A significant 63% of the open-end real assets funds maintain a redemption queue that is pro-rata based on NAV, and 53% implement redemption notice periods of 90 days.

These findings indicate a robust demand from investors for open-end real assets funds. The study suggests that there's an ongoing surge in new fund launches, which intensifies competition across various strategies.

The Importance of Fees and Terms

In an industry characterized by diversity in strategies and structures, fees and terms emerge as critical differentiators for investors. Funds offering more favorable fee structures often find themselves in a better position during investment searches. The study emphasizes that while standardization exists across many fund terms, minute differences—like redemption notice periods—can significantly affect liquidity and investment strategies.

Data Methodology

The insights from this study stem from a comprehensive approach. Callan collected data through its proprietary survey, supplemented by information provided by investment managers within its extensive database, CallanDNA. Additionally, due diligence involved a meticulous review of fund documents.

Final Thoughts

As evidenced by this study, investors have a wide array of options at their disposal. With a competitive landscape and increasing fund options, navigating the intricacies of fees and terms will be pivotal for success in the real assets sector. For institutional investors, leveraging this study as a benchmark can enhance decision-making processes.

For more detailed analysis, be sure to visit the summary post and access the complete study, which provides a broader perspective on the challenges and opportunities within the real assets funds domain.

About Callan

Founded in 1973, Callan is an employee-owned investment consulting firm that aims to empower its institutional clients through innovative strategies and customized solutions. With assets exceeding $3 trillion under its advisement, Callan represents one of the largest independent consulting firms in the United States. Dedicated to a client-focused approach, Callan serves a diverse clientele, including pension plans, endowments, foundations, and investment managers. Learn more at callan.com.