In most cases, performance fees for mutual funds are not worth the headache. That appears to be the conclusion of the majority of mutual fund firms as they overwhelmingly reject the idea of linking management fees to fund performance.

Performance fee arrangements -- basing the fee a fund company receives on the fund's success in beating an investment benchmark -- subjects mutual fund companies to increased uncertainty about revenues. The arrangement also creates the need for additional compliance to ensure that a firm or manager does not take outsized risks to increase compensation, according to industry observers and executives.

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