Every product has its price, and management fees are the price we pay for our pension savings. For the past two-and-half years, long before it was fashionable, Globes has declared that management fees charged by Israeli financial institutions are too high, that the fees soared after the Bachar capital-market reform, and that the regulator should take effective measures to deal with the problem.The Capital Markets, Savings, and Pension Supervision Department at the Finance Ministry has said in response that this was a “free market,” and that there was no need to intervene, asserting, “competition will bring management fees to equilibrium.” For their part, finance institutions claim that high management fees are the price to be paid for receiving quality investment management.Globes has examined the product the public receives for these too high-management fees – the return on investments in pension savings and provident funds. The answer is NIS 11.4 billion paid in management fees in 2007-11 to provident fund managers, investment houses and insurance companies, while the average return on provident funds over the same period is zero. The precise figure is 0.06%.The average nominal return on provident funds in 2007-11 was 4.09%.When inflation over this period is deducted, savers are left with no return at all on their investment. The same is true for pension savings and managers insurance policies.One of the pleasant features of management fees is that investment institutions collect them every month, rain or shine, irrespective of the investment's performance. Has any fund manager has ever considered cutting management fees because of poor performance, or has a CEO ever made a one-time reduction because of the dismal results provided by the product.Don't make us laugh.There are two kinds of provident funds: sector funds, which have low management fees (averaging 0.28% a year in 2007-11); and funds available for the general public, which account for 75% of provident funds' aggregate assets under management. These latter provident funds charged an average management fee of 1.04% a year in 2007-11 - 3.4 times the fee charged for sector funds. Worse, the publicly available provident funds had a return of 3.92% over this period, with the result that the real return was minus 0.32 percent a year, for a loss of 1.6% of the public’s money invested in them.Since the Bachar reforms forced the banks to divest their provident funds to investment institutions, the latter have collected NIS 3.3 billion in management fees from the public. Since the transfer, the average management fee rose from 0.64% to 1.11%, and anyone who imagines that a tenth of a percent is negligible should do the math – each tenth of a percent in management fees amounts to NIS 250 million.Furthermore, every shekel channeled to management fees is lost to the future accumulation and loss of compound- interest payments. This means that NIS 3.3b. in extra management fees means a loss of NIS 7b. in future pension disbursements.Had the higher management fees been accompanied by higher returns, compliance with tougher regulations, or improved service, there would be no grounds for complaint. But that is not the case.Nearly all the extra billions of shekels in managements fees were pocketed by a tiny group of capital market executives, who enriched themselves profligately, and to a few hundred middle managers at investment houses, whose salaries soared to make them among the top 10% of income-earners.The money was spent on opulent offices, customized jeeps, marketers, commissions, gifts, foreign travel for insurance agents and wasteful conferences.Management fees rose by up to 76% since provident funds were sold to investment houses. The eight biggest investment institutions bought the 10 biggest provident funds from the banks. Without exception, they have raised their management fees since 2006.The fees peaked in 2008-09, before subsequently edging down by negligible amounts. Some investment institutions raised the managements all at once, others gradually; but they raised the fees.For example, the Shefa Provident Fund, which was already expensive when it was owned by First International Bank of Israel, with a management fee of 0.91%, now has a fee of 1.75% under its new owner Yashir Investment House. When Yashir merged with Meitav Investment House Ltd., the management fee was lowered to 1.6% – 76% more than when the provident fund was owned by the bank.The Finance Ministry is trying to conceal the facts as much as possible, by not mentioning the data on its provident funds comparisons site, Gemelnet. As provident funds are merged – at the order of the ministry, dozens of funds have been consolidated, with hundreds more to follow – the funds’ pre-merger figures vanish, never to be retrieved again. Consequently, there is no way of knowing previous management fees.Excellence funds are the most expensive. The average management fee for public provident funds peaked at 1.11% in 2009, before dipping to 1.07% in 2010 and 1.02% in 2011. However, the increase in assets under management meant that annual revenue from fees was unchanged at NIS 2.5b. in both 2009 and 2010. Provident funds owned by Excellence Investments Ltd. charged the highest management fees in 2010 and 2011: 1.2%, down from their peak of 1.29%. Put another way, management fees are good and high management fees are great.In second place is Excellence’s parent company The Phoenix Holdings Ltd., controlled by Yitzhak Tshuva-controlled Delek Group Ltd. Phoenix’s average management fee is 1.15%.Infinity Investment House Ltd. shares second place. They are followed by Harel Insurance Investments and Financial Services Ltd. and DS Apex Holdings Ltd. (1.11%), Altshuler Shaham Ltd. (1.10%); Meitav and Tamir Fishman & Co. (1.09%).Psagot Investment House Ltd., the largest provident fund manager, charged management fees of 1.06% in 2011, down from 1.10% in 2010.The investment houses with belowaverage management fees are Analyst IMS Investment Management Services Ltd. (0.99%); Halman Aldubi Investment House Ltd. (0.98%); Hadas Arazim Investment House Ltd. (0.96%); Ayalon Holding Ltd. (0.95%); Menorah Mivtachim Holdings Ltd. (0.92%, excluding return-guaranteed funds); and Epsilon Investment House Ltd. (0.91%, excluding Mayan Provident Fund).It should be noted that Analyst, which never bought a bank provident fund, slashed its management fee from 1.45% in 2007 to 0.99% in 2011.The lowest management fees are charged by Clal Insurance Enterprises Holdings Ltd. and Yelin Lapidot Investment House Ltd., at 0.9%, and IBI Investment House Ltd., at 0.86%.Yelin Lapidot’s provident funds had the highest returns in the past few years, giving investors the best return on their money.