But you need investors to stick with you up to when the bubbles bursts and the period ahead of that is often a period of underperformance, so keeping fees low during this time period is a way that makes it easier for a client to hold tight.
If there is a period where active is underperforming, even if passive is also delivering poor returns, the easiest thing for an investors, or their clients, to do is switch from active to passive, even if the performance isn't much different, it allows the client to feel at least that they are taking action.
But also there are questions around the difference between the fee levels of comparable actively managed funds. While those differences are often capable of being measured in basis points, during a period of poor performance its a difference that can make a substantial dent in returns.
It is also worth asking about the level of experience of the fund manager and their record in previous cycles, such as how they think about the consequences of higher rates – too frequently the lessons of the past are forgotten by the next generation.
Simon Edelsten has managed global equity funds for more than three decades
