The Importance of Performance Fees in Mutual Funds

Do mutual funds with the performance fee perform better than ones with a fixed fee? Well, the answer is a little tricky because there isn't really a lot of data out there. Internationally, when researchers looked at data on the EU from 2001 to 2011, they didn't find evidence to indicate that performance fee-based mutual funds delivered superior returns. And while there's no way to make a similar comparison in India, we can still try. 6 out of 10 PMS funds failed to beat the mutual funds over a 5 year period. Looks like the performance fee wasn't incentive enough to deliver high returns.