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Investment fund boards are supposed to protect the interests of their shareholders and thus the fund investors. This implies overviewing the contracts with the different service providers, notably the investor advisor or more generally the respective management company. In principle, an asset manager should be compensated according to his performance. Typically, plain vanilla managers fees are a function of total net assets (TNA) under management. This is the case for 90% of the US Equity Mutual Fund advisory contracts. Performance is typically adjusted to risk and measured through alpha. The current industry standard is to measure alpha with a Carhart 4-factor model. Yet, mappings of the Carhart 4-factor alpha on the fees of the fund industry lead to a negative relationship, at...
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