Mutual funds charge a fixed fee which is typically 1-2% every year. Some people think that we change the incentives, get rid of the fixed fee and bring in a performance fee. Tell fund managers that if they deliver super-normal profits, they get a share of the cut too. This sounds quite exciting from an investor's perspective, doesn't it? But be warned, it's not a perfect solution.
There’s a new rumour in town. And it says mutual funds might soon be able to charge a fee based on how well they perform — a performance fee. In today’s episode for 25th April 2023, we explain why this might be a huge deal.