Some Australian equity extension fund managers, which include 130/30 investment strategies, are charging excessive fees for poor performance, according a report.

The van Eyk Australian Equities Extension Sector review of more than 10 fundamental and quantitative strategy fund managers found some managers are charging excessively high fees for minimal performance.

"Some sector offerings applied performance fees for simply outperforming the benchmark and some did not apply perpetual high water marks," said Chris Bigg, from van Eyk.

"We believe performance fees should only be applied when returns exceed the targeted outperformance of the fund manager's core Australian equities portfolio, with perpetual high water marks applied."

A perpetual high mark means fund managers do not receive performance fees before they recoup any losses made, said van Eyk.

Ashley Owen, chair of portfolio construction & asset allocation committee at Centric Wealth, said most of the 130/30 fund managers the firm had researched do not have high water marks.

"If they lose $20 from $100 then they don't get there performance fee but if in the next year they gain $20 it looks like a strong return [and they may get a performance fee]. This process can repeat over and over so there must be a high water mark established," he said.

While van Eyk was critical of some Australian equities extension fund managers, the overall consensus of the sector was positive.

"The quality of the fund managers was high and most investment teams were well rated in this year's Australian equities review," said Bigg.

"On a rolling 12 month basis, the peer group have, on average, outperformed the S&P/ASX 300 Index by 7.7 per cent to September 30, 2009."