Be it that actively managed funds have significantly higher fees than passively managed funds which simply track market benchmarks, the expectation of active funds have always been for them to beat the market. Yet, actively managed funds are in the midst of a long losing streak that began in 2008. Nobel laureate Eugene Fama and Kenneth French found that only about 2% of the 3,156 fund managers they examined had statistically significant evidence of skill. They also concluded that a portfolio of low-cost index funds is likely to perform about as well as a portfolio of the top 3% of actively managed funds.
Within this pool of funds, there exists a gamut of fee structures comprising various degrees of management and performance fees. It is my belief that there should be a distinct relationship between fees charged and expected fund performance, not unlike how one would expect a $100 steak to be pretty ......