Focus on what you get to keep
There's a lot of attention paid to fund management fees, with both regulatory and competitive pressure to keep fees low. The implication is that lower fees will result in higher returns to investors, but fees are just one of the inputs in determining the returns you will receive as an investor.
What really matters isn’t fees but net returns after tax – because that’s what you, the investor, get to keep. In particular what matters is net returns after tax over medium- to long-term horizons. Any fund manager (even us!) can fluke one good year, so you should focus on their average net returns after tax across two year, three year and five year periods.
Fees are only one input
It seems the accepted wisdom is that the only difference between competing funds is their level of fees, and so lower fees will result in higher returns to investors.
That may be true within directly comparable passively managed funds – if you have two competing NZX50 index tracking funds then yes the difference between their fees will be important. But other than that narrow situation the other differences between funds will overwhelm the relatively small differences in fees.
Base fees can range from as low as 0.1% pa for large passively-managed funds through to as much as 1.5% pa for some actively-managed equity funds, but most funds have base fees in the range of 0.6% to 1.1% pa. So the difference in base fees between two ostensibly comparable funds is likely no more than 0.5% pa.
But the difference in gross returns between funds, even within the same asset class, can be much higher than 0.5% pa. MJW’s excellent quarterly investment surveys show you the gross returns, before tax, for about 200 investment funds and for all the KiwiSaver providers. Their most recent survey, for the March 2021 quarter, shows variability in 5 year gross returns of: