Fees matter. But they are not the whole story.

Swedes are careful consumers. We compare electricity contracts, read ingredient lists and choose locally produced food. When buying clothing, we discuss quality, durability and production standards. We weigh price against substance.

When it comes to financial products, the conversation often looks different. Here, a single variable tends to dominate: fees.

That is understandable. Costs are concrete and measurable. But investing is fundamentally about something else, namely what capital can grow into over time in relation to the risk assumed.

At the same time, figures referenced by the Swedish Investment Fund Association show that seven out of ten Swedes are unaware that fund fees are already deducted before returns are reported. We speak frequently about cost, but less often about what that cost relates to.

“Low fees are, in themselves, a strength. If an active strategy does not add value, there is no reason to pay for it. That must be stated clearly,” says Jamal Abida Norling.

However, he believes the debate risks becoming one dimensional.

“Ultimately, investing is about expected return relative to risk. Fees are part of the equation, but they are not the entire picture.”

A market that has become more concentrated

Over the past decade, market structure has changed. The seven largest US technology companies today represent approximately 21.6 percent of global equity market capitalisation. This means that more than one fifth of invested capital in global equity markets is concentrated in a small number of companies with closely related growth drivers.

This is a consequence of how market capitalisation weighted indices are constructed. Capital is allocated according to size. As companies grow, their index weight increases. When capital flows into index funds, this dynamic is reinforced.

Index funds have helped reduce costs and make investing more accessible. That is a meaningful and positive development. However, increased concentration also influences future return assumptions.

“When large capital flows accumulate in the same companies, risk premia are compressed. Historical returns do not automatically translate into future returns. This is where analysis and judgement matter,” says Jamal.

Active management as risk assessment

Active management is not about reflexively deviating from an index. It is about assessing valuation, competitive positioning and long term potential.

“We analyse companies based on fundamentals and valuation. Sometimes that leads us to own companies that are also in the index. Sometimes it leads us to deviate. The key point is that the decision is deliberate,” says Jamal.

He emphasises that active management is not a guarantee of higher returns. Many active strategies do not generate sufficient value to justify their cost. That is a fact.

“That is precisely why competition and transparency are essential. Active management must earn its fee.”

At the same time, there are market environments where concentration, valuation levels or structural shifts make selectivity more relevant.

The influence of capital

For Viktoria Voskressenskaia, the discussion extends beyond return.

“To invest is to become an owner. Ownership provides the opportunity to influence companies on matters such as governance, climate strategy and long term incentives. That dimension is not visible in a simple fee comparison.”

Capital allocation is not neutral. How money is distributed affects which companies receive financing and how they evolve. In an active strategy, there is scope for dialogue and engagement. In a passive strategy, the mandate is to replicate the market.

Both models have their place. But their implications differ.

A more mature discussion

Passive solutions have contributed to market efficiency and lower costs for savers. That is positive. At the same time, it is reasonable to discuss how concentration, valuation and expected returns are connected.

“For us, this is not about a conflict between active and passive. It is about building portfolios that are resilient over time. Different strategies can complement one another,” says Jamal.

Discussing fees is important. But if the conversation stops there, we risk overlooking what ultimately determines investment outcomes: how capital is allocated, how risk is assessed and what level of future return is reasonable to expect.

We are careful consumers when purchasing goods and services. Perhaps we should apply the same care when discussing capital.

Not only what it costs.

But what it can create.