But that is even worse, right? That is paying a fixed price for someone to gamble for you. If you look at it objectively, a more sane pricing model would be t

But that is even worse, right? That is paying a fixed price for someone to gamble for you. If you look at it objectively, a more sane pricing model would be that you get a discount on the flat fees compared to what you would pay for a non-managed fund, but with a bonus paid on earnings. The value proposition from the fund managers is that they can significantly outperform a non-managed fund. If that is true, then what they lack is capital to actually play on a large enough scale (if they had the capital they would just play with their own money after all). Pension funds have a large amount of capital that they want to accrue interest on. The win-win scenario is that the fund managers agree to handle the money at a lower cost than what having them in some form of indexed managed would be, but that in return they take a share of any profits that are generated. If you just add on a flat % fee that is higher than what the indexed fund would charge, then the fund manager isnt assuming any risk.