Managers who like AUM fees say that they should do better when their clients do better — and worse when the clients do worse — and that their interests are therefore aligned. But for the most part that means paying a manager for beta rather than anything of true value.
This one is my favorite:
It should be obvious to all that in most cases it is not five times more difficult to manage five times more money.
Go over to Tom’s site and read this piece.
and also from Tom:
The most widespread lie in the industry (Bason Asset Management)
The Ridiculous Nature of Asset-Based Fees (Bason Asset Management)