Management fees compensate fund managers and are deducted from fund returns before those returns are reported to investors. These fees can range from .02% of fund assets per year for one institutional index fund to 3.25% for a balanced fund that has an all-inclusive fee schedule, according to Lipper.
Approximately 59% of fund portfolios have breakpoints that decrease management fees as assets in the fund increase, passing on economies of scale. However, Lipper explains, when assets decline these breakpoints work in reverse.
The study also finds that the number of funds that employ performance incentive compensation for the management company is on the rise.