News: Consultants dispute value of alpha fees.

Pensions Week, March, 2008

Byline: David Ricketts

Alpha-hungry pension funds are paying 50% more in fees than they were five years ago, according to new research from Watson Wyatt.

The global consulting firm found that fees now average 110 basis points compared to 65 basis points in 2002, with the majority of costs being paid in fees to external managers and brokers. One of the key reasons for the rise in fees has been the demand for alternative investments and the search for alpha.

However Watson Wyatt questioned whether funds were getting value for money.

"Investors have naturally assumed that they are paying these fees to reward manager skill, but in many cases they are wrong," said Paul Trickett, European head of investment consulting at Watson Wyatt....

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