Why mutual funds shun performance fees
Hedge funds, of course, are defined in large part by the fact that they charge performance fees. In theory, this is a good idea, as it aligns shareholders with managers. So why do 10 percent of mutual fund assets generate such fees? Why are Fidelity and Vanguard the only firms of note that do this? It has a lot to do with regulatory issues. Several companies have run afoul of the SEC for this. It makes a lot more sense to base fees on assets under management. I maintain that it makes for a much more predictable expense.
> Here's a MarketWatch article.
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