Key Takeaways
- • Investment management fees for open-end real assets funds reach as high as 20%, with median institutional fees at 10–15% according to a new Callan study of 144 real assets partnerships spanning real estate, infrastructure, farmland, and timberland.
- • Core real estate equity funds charge a median management fee of 96 basis points (based on $25 million NAV), while value-add funds command the highest fees at 130 basis points, reflecting strategy-specific pricing differentials.
- • Only 38% of funds studied charged performance fees; among those, European waterfall structures dominated at 84%, with median preferred returns across all performance-fee-charging strategies at 7% (excluding core real estate equity).
- • Institutional investors increasingly prioritize redemption terms as a competitive differentiator: 63% of open-end real assets funds employ pro rata redemption queues, and 53% enforce 90-day redemption notice periods.
- • The proliferation of open-end real assets options is driving investor focus on fee competitiveness and structural terms, as seemingly minor differences in both areas materially impact net returns over fund lifecycles.
Summary
A comprehensive Callan study released December 18, 2024, has quantified the fee landscape for open-end real assets funds, revealing significant variation and presenting institutional investors with critical benchmarking data. The study analyzed 144 real assets partnerships across real estate, infrastructure, farmland, and timberland strategies, finding that management fees can reach as high as 20%, while median fees for institutional investors typically fall between 10% and 15%.
Fee structures vary meaningfully by real assets strategy. Core real estate equity funds charge a median management fee of 96 basis points based on a $25 million net asset value, while value-add strategies represent the highest-fee category at 130 basis points. This tier-based pricing reflects the perceived complexity and active management intensity of different strategies, with value-add positioning commanding a premium relative to core holdings. Only 38% of the 144 funds reviewed charged explicit performance fees, indicating that base management fees remain the primary revenue model for most open-end real assets managers.
Performance fee structures, when present, demonstrate regional clustering. Among the funds charging performance fees, European waterfall mechanisms were predominant at 84%, suggesting a concentration of this fee model within European fund management. The median preferred return across all performance-fee-charging strategies stood at 7%, excluding core real estate equity funds where only four of the reviewed vehicles carried performance fees.
Redemption mechanics have become a material consideration for institutional capital. The study found that 63% of open-end real assets funds employ pro rata redemption queues based on net asset value, while 53% imposed 90-day redemption notice periods. According to Aaron Quach, vice-president at Callan's real assets consulting group and the report's author, these structural details now rank alongside fees as competitive differentiators: "What stands out in the study is how many institutional open-end options exist today and how seemingly minor differences in fees and terms can impact investors." Institutional investors are explicitly re-evaluating both fee levels and redemption terms when selecting open-end real assets managers, signaling a shift toward more disciplined due diligence in alternative asset selection.
Fee structures vary meaningfully by real assets strategy. Core real estate equity funds charge a median management fee of 96 basis points based on a $25 million net asset value, while value-add strategies represent the highest-fee category at 130 basis points. This tier-based pricing reflects the perceived complexity and active management intensity of different strategies, with value-add positioning commanding a premium relative to core holdings. Only 38% of the 144 funds reviewed charged explicit performance fees, indicating that base management fees remain the primary revenue model for most open-end real assets managers.
Performance fee structures, when present, demonstrate regional clustering. Among the funds charging performance fees, European waterfall mechanisms were predominant at 84%, suggesting a concentration of this fee model within European fund management. The median preferred return across all performance-fee-charging strategies stood at 7%, excluding core real estate equity funds where only four of the reviewed vehicles carried performance fees.
Redemption mechanics have become a material consideration for institutional capital. The study found that 63% of open-end real assets funds employ pro rata redemption queues based on net asset value, while 53% imposed 90-day redemption notice periods. According to Aaron Quach, vice-president at Callan's real assets consulting group and the report's author, these structural details now rank alongside fees as competitive differentiators: "What stands out in the study is how many institutional open-end options exist today and how seemingly minor differences in fees and terms can impact investors." Institutional investors are explicitly re-evaluating both fee levels and redemption terms when selecting open-end real assets managers, signaling a shift toward more disciplined due diligence in alternative asset selection.
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