We can’t help feeling that amongst the great fee debate sparked by the Cooper Review, some people are missing if not “the” point, at least one important factor: PERFORMANCE.
AFM’s E5 Model Portfolio for instance consists of five equity based funds which charge management fees of up to 2% and a performance fee (above a hurdle)of 20%. The net annualised performance, after fees, of these managers over the past 45 months has been close to +15% whilst the ASX has fallen at an annualised rate of over -5%.
Of course high fees can detract from investors’ returns, but fees should be considered as part of the overall return. It is all well and good to compare the effect of different fees on identical returns, without considering the performance of the underlying investment.
By all means debate, compare and consider fees, but don’t forget the effect of performance. There seems little point in selecting an investment with poor or negative returns just to save on fees.
