This paper compares the efficiency of mutual funds that charge management fees based totally or partially on returns (performance) with those that charge them exclusively on assets under management. We analyse Spanish risky mutual funds during 1999–2009 for which both types of management fees are authorised. We find that performance-based fee funds perform significantly better than the other risky funds considered. Moreover, a strongly positive performance-expenses relation is found for such funds, and negative for the other. These results seem to indicate more efficient management in performance-based fee funds, in contrast with their low presence in the fund industry.