Effective Fee Rate
The average management fee a firm actually earns across all its assets, calculated as fee revenue divided by average AUM and quoted as a percentage (or in basis points). It captures the firm's mix: a manager tilted toward low-fee index products earns a fraction of what an alternative manager charging on illiquid private funds earns. A declining effective fee rate -- fee compression -- is the structural headwind facing traditional active managers as money shifts to cheaper passive products, so the trend in this rate is as important as its level.
Related terms
Absorption Rate · AFFO per Share · Allowed Return on Equity · Alternative Investments · Anchor Tenant · Assets Under Management
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