A growing number of younger small-cap managers in Australia are charging performance fees, even though they may not be worth it, according to research firm van Eyk. Its research found that small-cap funds Down Under most likely will be driven by market conditions rather than a manager’s ability to pick stocks. Nevertheless, in a review of newer managers performed because of concern over portfolio construction and risk management practices, van Eyk discovered that a number of young small-cap managers were introducing performance fees to boost their revenue base while the funds they manage were growing. “Unfortunately,” says Jerome Lander, acting head of van Eyk’s fund manager research, “the increased prevalence of performance fees had made overall fee levels higher for investors in smaller company products.” Lander added that van Eyk does not recommend that “small company managers charging hedge fund-like fees unless we know they are worth it.” Only half of the small-cap managers screened passed van Eyk’s review.