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There have been a lot of academic discussions concerning the efficiency of markets and the possibility to generate abnormal performance. In principle, if markets were more or less efficient, there should not exist any possibility to, on average, generate abnormal post-fee performance. This implies that there should be a positive relationship between before-fee performance and fees in the fund industry. According to some recent research, however, the relationship is negative (Gil-Bazu, J. and Ruiz-Verdu, P. (2009). It might be worthwhile highlighting that Fund management fees are typically computed as a fixed percentage of the value of assets under management (AUM).
These fees, together with other operating costs, such as custodian, administration, accounting, registration...
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