It’s one of your most common questions: what costs are actually included in CEM’s benchmarking? Is carried interest in? What about VAT? Does CEM benchmark marketing expense?
These questions matter. The answers shape how you interpret your results, how you compare against peers, and ultimately how useful the insights are when you’re making real decisions.
CEM receives investment data from hundreds of institutional investors across multiple regions worldwide, which means ensuring apples-to-apples comparisons across organizations and geographies is everything. The approach rests on CEM’s data integrity principles, and the goal is to reflect the true cost of investing and operating, without the distortions that come from inconsistent data.
Start with the full picture, then be practical
In a perfect world, every cost would be benchmarked. In practice, not every cost is consistently available or comparable across the industry.
So our approach is balanced. Costs are included where reliable data exists, and organizations with stronger transparency are supported in surfacing more of it. Where data is missing in ways that would skew results, costs are imputed rather than ignored. Fund-of-funds fees are a good example: leaving them out would make funds of funds look artificially cheaper than they are. On the other hand, costs where data is still immature and wouldn’t materially affect the conclusions are excluded for now.
CEM does not audit reported costs against costs disclosed in the annual reports. However, for clients looking to reconcile their benchmarked costs with their costs disclosed in financial statements, CEM can provide this service with relevant insights.
Investment costs: what’s in and why
Costs that are netted from returns are captured, as are costs reported before any offsets like revenues or reimbursements. Applicable taxes, including VAT and GST, are included. Non-cash costs like soft dollars are valued and counted, too.
In practice, this covers gross base management fees (preferred over net fees because they’re more consistent and contract-based), performance fees and carried interest, internal investment management and oversight costs, and other direct investment costs such as consulting, custody, and audits tied to investments.
Costs can be reported at the individual mandate or option level, or at the asset class and program level, depending on what’s available.
Investment costs: what’s excluded (for now) and why
Transaction costs vary significantly based on trading volume and are inconsistently reported, making comparisons unreliable. Partnership expenses haven’t yet been standardized or made widely available across the industry. Property management costs are operational in nature rather than investment-decision-related, and they aren’t consistently available across different operating models. Marketing expenses for defined contribution funds in competitive markets are also excluded.
None of these exclusions are permanent. In some regions, partnership expense data is already being collected in anticipation of future inclusion. There’s a clear long-term trend toward better and more complete data, driven by the maturation of alternative strategies in institutional portfolios, improved technology, and the collective efforts of industry stakeholders. As that trajectory continues, what counts as “includable” will keep expanding.
It is worth noting that CEM’s return comparisons are net of all investment costs, including costs that are excluded from benchmarking, such as transaction costs, partnership expenses and property expenses. We will be covering more on return comparisons in a future blog.
Pension administration costs: what’s in and why
Staff costs cover salaries, bonuses, benefits, and employer taxes. Third-party costs include consulting, outsourcing, and professional services. Other direct costs, such as travel, training, subscriptions, and operations, are included as well.
Pension administration costs: what’s excluded and why
Healthcare costs fall into this category, as do third-party and optional benefits. For defined contribution funds, insurance administration (including disability), marketing and product development costs, and financial advice costs are all excluded.
Why this matters to you
Too little benchmarking creates blind spots. Too much, without consistency, just creates noise. The aim is results that are genuinely comparable across peers, reflective of real economic costs, and transparent in how they’re built.
Every cost excluded from the benchmark is disclosed in your reports, so there are no surprises. And if you want to go deeper into areas not covered by the standard investment and administration benchmarking, the Research and Analytics team offers bespoke solutions through custom research tailored to your specific needs.
You can reach them at research@cembenchmarking.com.
This blog is part of our “Opening the Black Box” series. If you’d like to receive new posts in your inbox, please click here to subscribe.