This week we will look at client trends regarding administrative fees! Did you know that you can post administrative fees/expenses in Fundriver? Administrative fees are different from investment fees charged by investment managers/brokers. Administrative fees charged against an endowment are in addition to an annual spending policy. Examples of administrative fees would be a consulting fee paid to an investment advisor, Fundriver software fees, salaries for individuals related to endowment management, and fundraising costs associated with endowments.
Within Fundriver there are three different fee calculation options to choose from:
- Percent of fund market value
- Proportional allocation to all funds
- Dollar amount per unit
Each option is easy to set up, assign and allocate!
Client Trends
We recently compiled data from over 400 current clients. Currently we have over 200 clients using at least one administrative fee type. Note that one client can have multiple administrative fees, as well as various administrative fee types. The below chart shows the percentage of clients using the various fee types. The proportional dollar allocation was the most popular fee type among our clients.
The dollar amount per unit fee type yielded an average of $0.95 per unit as a charge back to the endowment.
The average percent of fund market value among clients was 0.77%.
The average dollar amount allocated across pools was $171,000.
Digging into the proportional dollar allocation a bit more, not surprising admin fees grew as endowment size grew;
However, the next graph looks to compare the dollar amount of the administrative fee charged, to the overall pool size. Here, you can see that the percentage started to fall off once endowments grew to the $500M mark and beyond:
Conclusion
With the recent downturn in the economy due to COVID-19, now may be a time to reassess administrative fees. If your operating budgets are tight, you may want to consider an administrative fee charged to your endowment. Doing so may help relieve budget stress.
Feel free to drop a comment below and let us know how your organization uses administrative fees!
Want to check out more client trends? Earlier this year we posted about trends in spending – find it here!