In fact, often the higher the fee, the worse the performance. No wonder that searches on Google for "ETF", low-cost exchange traded funds, have overtaken searches for "managed funds" since about 2014.

What matters to an investor is what goes into their pocket – it is the return after fees and costs that counts.

Canstar's analysis finds that most managers with higher fees do not produce sufficiently high returns to more than compensate investors for the high fees.

Based on an initial investment of $50,000, the average investment management fee paid by individual small investors for multi-sector balanced managed funds is just a under 1 per cent, but can be as high as 2.5 per cent.

Average "retail" fees – those paid by individual investors - on multi-sector "growth" funds are 1.16 per cent and 1.18 per cent on multi-sector "aggressive" funds. Fees are usually charged on the entire funds under management.

"Based on the funds assessed by Canstar for the 2016 Star Ratings, our data found that a higher fee did not, during the period assessed, mean better performance for multi-sector funds," says Justine Davies, Canstar editor-in-chief.

Multi-sector managed funds are those that spread the money between the various asset classes.

They are actively managed; meaning that the fund manager buys and sells investments in the hope of outperforming the market overall after fees.

There are some fund managers, particularly among the boutique managers, who do outperform the market over the longer-term after fees.

However, generally, there is little consistency in performance, with the best performers over one time period falling to the foot of the performance league tables over the next period. Some funds can underperform for years and years.

Superannuation funds do much better from fund managers. They have in-house research staff or hire external advisers to help identify those active managers that can add value after fees.

Also, as super funds are responsible for often billions of dollars of their members' money, the funds pay only a fraction of the fees paid by retail investors.

Another reason that managed funds are becoming less popular with small investors is that financial planners can no longer receive commissions for recommending managed funds to them.

It is true that fund management fees have been coming down, but they are still much higher than the fees of ETFs.

They are listed on the Australian sharemarket and units in them are bought and sold just like shares in listed companies.

They track markets and prices of commodities, like gold or the oil prices for example.

That means they will never outperform the market but neither will they underperform.

Most ETFs have fees of between 0.2 and 0.5 per cent, a fraction of those charged by managed funds.

To see the impact of fees on the returns of managed funds take a look at the Australian Securities and Investments Commission's calculator on its MoneySmart website.

Twitter: @jcollett_money