The European Securities & Markets Authority (Esma) has revealed that retail investors are forking out more when it comes to the cost of products compared to their institutional counterparts.
In its second annual statistical report on the cost and performance of retail products in the EU, the regulator highlighted a great gap between the two groups.
According to Esma, retail investors pay as much as 40% more on investment products than institutional investors, leading to much lower returns.
To put this into context, a hypothetical 10-year retail investment of €10,000 in equity, bond and mixed funds, provided a net return of around €16,160 (£14,209, $17,557) during 2009-2018, with costs totalling to €2,800.
And the low rates currently available on the market have pushed retail investors to seek higher risk products which, in turn, come with higher costs, regardless of asset class.
Greater information for individuals
Steven Maijoor, Esma’s chair, said: “In this second annual report we continue to see the high impact of costs on the final returns that retail investors receive on their Ucits investments.
“The costs paid by retail investors are significantly higher than those paid by institutional investors, leading to lower net returns for this category of investors.
“The report also finds that, due to the higher costs, the net returns on actively managed funds are lower, on average, than those for passively managed funds.
“The report highlights the continued need for retail investors to be provided with clear information about the impact of costs on the returns they can expect to receive, allowing them to make informed investment decisions,” he added.
