Director of Investment Management Targets Adviser/Sub-Adviser Fee Splits
Norm Champ, the Director of the SEC Division of Investment Management, drew attention to multi-manager funds and the split of advisory fees between advisers and sub-advisers. Mr. Champ noted “several private actions alleging that a fund’s subadviser does most of the work but the primary adviser retains a large portion of the fee.” He reminded fund sponsors of their “fiduciary duty with regard to the receipt of compensation for services to the funds they manage.”
OUR TAKE: It is unclear whether the plaintiffs in the cases Mr. Champ notes have any real basis for their breach of fiduciary claims under the Investment Company Act. Regardless, it appears that the Division of Investment Management (and perhaps OCIE) will be examining the fee splits between advisers and sub-advisers and compare the fees to the services offered.