All costs incurred within a fund — for example management fees, transaction-related expenses or front-end loads — are deducted from the fund’s gross performance. These costs are already reflected in the fund’s published performance figures and in the development of the net asset value.

For investors, the decisive metric is therefore the net return after costs. Only the performance after all fees have been deducted provides a realistic basis for assessing how an investment has developed. In practical terms, fund costs reduce the return directly, which means that the net performance is the relevant measure for comparing investment products.

Even small differences in costs can lead to significant deviations in final wealth over long investment horizons. Higher fees must be compensated by stronger net returns. Otherwise, they reduce the compounding effect and limit the growth of capital.

In some segments — for example broad index exposures via large equity ETFs — low costs are a key driver of long-term outcomes. In other segments, however, a strict focus on cost minimisation can be counterproductive. Reducing the investment universe to achieve the lowest possible cost level can lead to missed return drivers or insufficient diversification.

To draw meaningful conclusions, investors should review both return and risk indicators after costs. Metrics such as maximum drawdown or volatility help to assess the robustness of returns. As a rule, investors should rely on the performance after costs, which fund companies must disclose.

The cost structure is an important element when comparing funds with similar investment strategies. A fund with higher fees must generate a sufficiently strong net return to justify these costs. In certain segments — for example ETFs on broad market indices or money market funds — low costs are a decisive factor.

In other segments, such as multi asset or bond strategies, the lowest-cost products are not always the most effective. Some low-cost funds reduce diversification or narrow the investment universe to maintain minimal expenses. This can result in weaker return characteristics or higher concentration risks.

Costs should therefore be considered, but they should not be the sole criterion. A comprehensive comparison includes net performance, the stability of results, the underlying investment process and the risk profile.

It may appear intuitive that a fund with higher costs must take more risk to compensate for these expenses. In practice, this depends on the investment approach. A fund that aims for broad diversification across multiple return drivers can manage risk more flexibly than an index-tracking ETF with a fixed benchmark.

Investors should therefore focus on the net outcome, not on the cost level alone. The lowest-cost option is often an ETF, but it offers no mechanism for active risk management. Index-tracking structures may also be affected by herd behaviour. Flows tend to increase in rising markets and reverse in periods of stress, which can amplify market dynamics.

A fund with a clearly defined investment process and active risk management may achieve more stable results in challenging market phases, even if its cost level is higher. The relevant question is how effectively a strategy manages risk and return after costs.

Hidden or non-transparent fees can disadvantage investors. A clear and well-structured cost framework, by contrast, supports informed decision-making and reflects a responsible approach to investor interests. It is also important that the published performance figures of a fund include all relevant costs. Investors should therefore always review the net performance, not isolated fee components.

High transparency creates trust and enables an objective comparison between investment products. A transparent cost structure allows investors to assess the relationship between return potential, risk profile and overall expenses. For fund providers, a clear presentation of costs strengthens credibility and supports a consistent, investor-focused approach.

Fund costs have a direct impact on returns. All expenses are deducted from the gross performance, which means that the net return is the decisive figure for investors. Over long horizons, even small cost differences can significantly influence final wealth due to the compounding effect.

Low costs are particularly important in segments such as broad index ETFs or money market funds. In other segments, such as specialised or multi asset strategies, a strict focus on minimising fees can lead to missed opportunities or reduced diversification.

Costs are therefore relevant for fund comparisons, but they should not be the sole criterion. The most cost-efficient funds are not necessarily those that deliver the most robust long-term results. Very low fees can also lead to benchmark-oriented investment approaches with limited flexibility.

Higher costs do not automatically imply higher risk. A broadly diversified fund with a well-designed investment process can provide more stability than a low-cost index tracker without active risk management. ETFs may also be exposed to herd effects, which are often underestimated after extended market upswings.

Transparency in fund costs is essential. Investors should ensure that published performance figures reflect all expenses, enabling a fair assessment of net returns and risk characteristics.

A broader perspective — beyond the cost level alone — allows investors to evaluate how a strategy creates return potential while managing risk effectively. Learn more