The average cost of investing in a multi-manager fund has fallen by 14% since 2014 as a result of a number of industry pressures, including price competition from passive products.
According to data by fund research firm Defaqto, the average ongoing charges figure (OCF) in 2014 for a multi-manager fund was 1.73%, falling to 1.49% this year. For a multi-asset fund, the average OCF has dropped from 1.34% to 1.18% over the same period.
The firm said a key reason for the fall is the increased popularity of index funds and ETFs, which are significantly cheaper than active funds. Its figures show the average UK equity ETF charges 0.33%, while a UK fixed income ETF has an average fee of 0.17%.
A comparison of the various Investment Association multi-asset sectors, including Flexible, has shown the greatest price falls have occurred in the Mixed Investment 20%-60% Shares sector.
For both multi-asset and multi-manager funds in that sector, the OCF fell by 19% since 2014. The average multi-asset OCF was 1.33% in 2014, and is now 1.07%, while multi-manager funds saw the figure reduce from 1.78% to 1.43%.
Patrick Norwood, insight analyst at Defaqto, said: "Managers are finding it harder to justify charging high fees, particularly as they cannot guarantee outperformance against cheaper passive funds."
Looking to the future, Norwood said the fees on multi-asset products are likely to fall further, but he does not expect these decreases to continue indefinitely.
He said: "There will come a point where they cannot go any lower, as active funds will never charge less than passives. Those managers with a strong performance record might be able to get away with charging a bit more, but those funds which hug the benchmark will find it much harder."
Separately, the firm also examined the average asset split across these sectors to identify how diversified multi-asset funds really are, which was conducted prior to the EU referendum.
In the face of Brexit uncertainty, funds in all mixed asset sectors had a higher allocation to global fixed income than UK corporate bonds and gilts. However, the vehicles had a bigger weighting to UK equities than global equity sectors, followed by North American stocks.
The highest UK equity weighting, at 25%, was found within funds that sit in the Mixed Investment 40%-85% Shares sector, while Flexible funds had the highest weighting to all other equity regions - Europe ex UK, North America, Japan, Asia Pacific ex Japan and emerging markets.
Defaqto suggested this could be due to the home bias of managers investing in their domestic market and desire to invest in established currencies, but called this a "counterintuitive" move ahead of last month's referendum.
