Business Times had an editorial today cautioning investors to “look very closely at the fee structure” when considering funds.
Take the the controversial case of CitySpring Infrastructure Fund charging performance fees.
CitySpring’s managers chose to pay themselves most of the management fee in shares, rather than cash. There are investors who think that a slight dilution… is unimportant, as long as the fund maintains its targeted cash distribution. This is a mistake.
BT went on to calculate that investors have lost 8.2% of their money due to the large management fee.
As I said before, mutual funds, unit trusts, and other funds that operate in similar fashion all charge certain mandatory fees regardless of whether they help you make money or otherwise. Some, like CitySpring, charge even more in the form of “performance fees”.