South African financial markets are way behind the curve when it gets to fees and how we pay investment professionals. In one subset of the industry we often believe fund managers when they proclaim that in order to produce outstanding long term performance it makes sense to pay a higher cost for research and investigation. In other words, higher fees equal higher total returns. We should find a graph as indicated below should this argument be true. Funds with a higher TER (total expense ratio – a measure of how much investors pay for being invested in the fund) will produce higher returns.

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