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Why cost matters when comparing active managers
Eric Dzuba
October 1, 2026
KEY TAKEAWAYS
- Evaluate manager’s philosophy, investment process, capabilities and track record first
- Use fees as a differentiator only when managers are of similar quality
- Remember that basis points saved remain invested and compound over time
- Total cost reporting means value must be clearly demonstrated
For years, investors have been told fees matter. And they do. Every dollar paid in investment costs is a dollar that is no longer working toward future financial goals. Over time, even modest fee differences can compound into meaningful differences in wealth accumulation. But focusing on fees alone can sometimes lead investors to overlook the more important question.
“What value am I receiving for the cost I'm paying?,” says senior portfolio consultant Eric Dzuba.
When evaluating active investments, investors should first determine whether a manager's investment philosophy, research capabilities, risk management approach and long-term track record align with their objectives.
“Cost is an important consideration, but it should be viewed in the context of the overall value a manager brings to the table,” he says.
Some active managers invest more than others when it comes to research depth, portfolio management personnel and investment capabilities to help investors pursue better long-term outcomes. These capabilities can provide meaningful value and fees should be considered alongside these.
“The challenge comes when comparing multiple active managers that appear to offer similar benefits. That's where investors need to dig deeper,” says Dzuba.
When two managers are similar, fees may be the tiebreaker
Suppose two active managers invest in the same asset class, the same category and demonstrate similar long-term results. In that case, cost becomes a more important differentiator. If investors believe both managers are capable of helping them achieve their long-term objectives, the manager with lower fees may deserve a closer look.
“The reason is simple: every basis point saved remains invested. Those savings can compound over time, potentially allowing investors to retain more of their returns and put more money toward their financial goals,” he says.
This doesn't mean investors should automatically choose the cheapest active fund available. Cost should never be evaluated in isolation. A lower fee may not represent better value if it comes at the expense of investment expertise, research depth or a disciplined risk management process.
Instead, investors should start by identifying managers they believe can successfully meet their needs. Factors such as investment philosophy, consistency of process, quality of research, portfolio construction and stewardship should all play an important role in the evaluation.
At that stage, some managers may simply outpace others on these metrics and offer competitive fees making the decision easy. But if investors have narrowed the field to those they view as reasonably comparable in quality, fees may become a deciding factor.
“Think of it as hiring a professional home builder. Most people would not automatically select the least expensive option without considering years of experience, depth of expertise and their track records. Though no two builders are ever exactly the same, if they offer similar qualifications and capabilities, many naturally gravitate toward the lower-cost choice. The same basic principle can apply when selecting an active investment manager.”
Value becomes the new differentiator amid total cost reporting
This approach is particularly relevant today as investors face increased transparency around investment costs due to total cost reporting. Greater awareness of fees is encouraging investors to think more critically about value. Active managers are increasingly expected to demonstrate not only strong investment capabilities but also a commitment to delivering those capabilities efficiently.
Importantly, low fees and high-quality active management are not mutually exclusive. Some firms have used scale, operational efficiencies and long-term investment disciplines to reduce costs while maintaining robust research capabilities and portfolio management resources. For investors, this can create an attractive combination: access to active management benefits at a lower cost.
Finding the best value proposition
“Ultimately, successful investing is not about finding the cheapest fund. Nor is it about paying more simply because a fund is actively managed. The objective is to identify the best value proposition,” says Dzuba.
Investors should look for active managers that offer the research, expertise and risk management capabilities they believe can help them achieve their long-term goals. But when comparing managers with similar strengths, fee differences matter. Choosing the lower-cost option may allow investors to keep more of their returns, benefit from the power of compounding and improve their chances of reaching their financial objectives.
“In the end, the most effective approach is often the simplest: try to compare apples to apples, focus on value first and cost second, and when the value is comparable, let lower fees work in your favour.”
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