What’s the highest charge you should pay for a fund?

Over the last couple of years I've explored the idea of fund costs and performance. The first piece of research I carried out was for the article 'Buy cheap, buy twice?'

In that particular research piece I looked at the UK All Companies sector and the performance of funds versus their annual charge (OCF) over numerous five year periods. In order to carry out the research I grouped the cost of funds within the largest unit trust sector (namely UK All Companies) into quartiles based on cost (from cheapest to most expensive). I then examined the average performance of each band over multiple five year periods.

The result was that there wasn't a direct relationship between cost and net performance (that's performance after charges). However there was an anomaly whereby funds with an OCF of around 1.22% fared worse while those nearer 1.6% fared best.