Callan's 2025 Cost of Doing Business Study Details Fee Trends for Institutional Investors

Whats Happening:

Callan, a leading institutional investment consulting firm, has released its 2025 Cost of Doing Business Study. The study, based on data from 180 asset pools totaling over $772 billion, reveals that total investment management fees averaged 40 basis points across all investor types. Asset allocation is identified as the primary driver of total fund fees, with shifts towards alternatives pushing costs higher for many investors.

Key Moves:

• Total investment management fees averaged 40 basis points across all investor types

• Asset allocation identified as the biggest driver of total fund fees

• Increased allocations to alternatives are pushing total fund costs higher for many investors

By The Numbers:

• Study based on data from 180 asset pools totaling over $772 billion

• Average fees for nonprofits have risen 16% since 2020

• Corporate and public fund fees fell by 17% and 4%, respectively

Key Quotes:

• "The study provides an important benchmark for institutional investors evaluating the cost-effectiveness of their investment programs," said Ivan "Butch" Cliff, executive vice president and director of research at Callan.

• "While they continue to find ways to lower fees within asset classes, shifts in asset allocation—especially toward alternatives—are pushing total fund costs higher for many."

Bottom Line:

Callan's 2025 Cost of Doing Business Study highlights the ongoing challenge for institutional investors to balance cost-effectiveness with potential returns. While efforts to reduce fees within asset classes continue, the shift towards alternative investments is driving overall costs higher. This trend underscores the importance of strategic asset allocation decisions in managing total investment expenses.

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