ESMA Market Report: Total costs of investing in UCITS and AIFs

What’s new?

On 6 November 2025, the European Securities and Markets Authority (ESMA) published its Market Report (the Report) on the total costs of investing in Undertakings for Collective Investment in Transferable Securities (UCITS) and Alternative Investment Funds (AIFs).

The Report (which was accompanied by a Factsheet) provides an analysis on distribution costs, which account for 48% of total costs for UCITS and 27% for AIFs. ESMA notes that these costs are primarily driven by the role of credit institutions and investment firms in the distribution chain.

The Report also confirms that inducements play a significant role in ongoing costs. Inducement agreements between the distributor and the manufacturer of a UCITS can account for up to 45% of the ongoing costs.

Key findings

1. Distribution costs: Distribution represents 48% of UCITS total costs and 27% of AIFs. Distribution costs differ by provider, distributor, asset and fund type.

2. Distribution dominance: Credit institutions and investment firms account for 60% of UCITS distributed NAV. AIFs show an even split between direct and indirect distribution.

3. Inducements: Inducement agreements amount on average to 45% of product ongoing costs for UCITS and 34% for AIFs.

4. Information fragmentation: Distribution cost information is not fully harmonised across the different pieces of EU legislation.

5. Packaged Retail Investment and Insurance Products Key Information Documents (PRIIPs KIDs): Maximum one-off fees disclosed in PRIIPs KIDs do not reflect actual fees.

6. Total costs: Actual retail UCITS costs range from 0.5% (passive bond UCITS) to 2% (active equity UCITS). AIFs costs range from 1.4% to 2.8%.

Cost Drivers

The Report also summarises the key cost drivers and assigns a high impact rating to:

Product Costs

• Fund characteristics: In the case of UCITS, larger funds typically have lower costs than smaller funds due to economies of scale.
• Management type: Actively managed funds have higher costs compared to passive funds or passive ETFs.
• Product characteristics: Higher risk funds incur greater costs than lower risk funds (i.e. equity funds, high-yield fixed income, emerging markets or real estate in the case of AIFs).

Service / Distribution Costs

• Domicile: There are notable differences in distribution costs across Member States. As a result, market practices contribute to significant cross-country variation in fees. National regulatory specificities may also have an impact (i.e. the Dutch ban on inducements for retail clients).
• Inducements: Inducements affect the overall costs structure of investment services and help explain variations in how products are marketed and offered to clients. The amount of inducements paid may affect the level of distribution charged.
• Type of service: Services such as investment advice are mostly concentrated in credit institutions and investment firms distribution channels and typically entail higher fees.

Next Steps

The findings will contribute to the broader Savings and Investment Union (SIU) debate, particularly regarding retail investor participation.

ESMA will continue to publish its annual report on fund costs and performance, supported by an interactive dashboard allowing users to compare aggregate fund costs across product types and countries.