The relentless pressure from "passive" funds is making an impact on those actively run portfolios.

The index-fund juggernaut has put asset management under pressure because of its low fees and the Alpha-chasers in the actively managed part of the industry are also feeling the heat.

Cerulli Associates, the research and analytics firm, said that in Europe, asset managers’ fees are coming down in a Darwinian environment of battles over clients, the need for economies of scale and an unfriendly regulatory climate.

The number of active funds with fees of less than the traditional 100 basis points is rising. The firm cited examples of large active managers that have recently launched funds with lower fees linked to performance, in what it said "could be the beginning of a fightback for flows among active managers."

Big price cuts across index-tracking funds and exchange-traded funds has benefited passive strategies, with industry behemoths such as BlackRock and Vanguard in the US, or Lyxor in Europe, faring well as a result. The trend is part of why a common refrain has been that asset management will see more consolidation, squeezing out mid-size firms and leaving only boutiques at the specialist end.

But as the decade-long bull market in equities has given passive investors an easy ascent, the case for the index-tracking approach might hit trouble if markets flip over. And there may not be much further room for passive funds’ fees to come down – so the pressure is switching to fees on the active side, according to Angelos Gousios, director of European retail research at Cerulli, said.

Aside from the odd single basis point, passive fees cannot fall much below the current lowest levels of around 5-6 bps, Cerulli said. "Running and trading investment funds costs money; even a cheap tracker fund has dealing costs," Gousios said in a report.

The ability of a low headline fee to attract capital is becoming increasingly muted. "Investors know that cheapest is not necessarily best. Greater attention is being paid to how funds are managed," he said.

The fee compression trend has been noticed for a while. In response to investors moving money to index funds and low-cost actively managed funds, more US equity funds cut their expense ratios in 2017 than in 2016, a report by Morningstar in February this year said. The fund tracker and analytics firm said it examined the expense ratios for actively managed funds that invest predominantly in domestic stocks. 

Last year, BlackRock, the world’s largest listed fund manager, shifted some of its teams from the actively managed fund space, a move seen as a sign of how index funds have squeezed the sector.