Institutional investors, facing both lower returns over the next decade and growing liabilities, are taking control of the one factor they can: costs.

A recent survey of 89 participants from 86 large money managers found that asset managers are increasingly discounting fees in the face of pressure from big institutional investors. According to the survey, conducted by Institutional Investor Membership groups, 21 percent of respondents reported that discounting had pushed fees down by up to 20 percent. Another 23 percent said fees declined 20 to 40 percent.

The asset management industry is among the most profitable in the world, but fee pressure combined with lower market returns from investments could significantly drive down margins. Asset managers are also being hit by the growing use of cheaper and commoditized passive strategies that simply aim to match the performance of an index. In a paper in the Financial Analysts Journal last year entitled "Murder on the Orient Express: the Mystery of Underperformance," Charles Ellis writes, “over the past several decades, fees for institutional investors have risen from less than 1/10 of 1 percent to nearly....