Do you know what the true cost of investing is? Not many people do and I don’t pretend to be one of them. The closest we can get to find out what people get paid to manage other people’s money is the so-called total expense ratio, or TER.But even this measure of costs, which is a more accurate measure than the basic annual management charge, doesn’t tell the full story.

That’s because it doesn’t include turnover costs – which will add another 0.74 per cent of costs to the average actively managed fund that invests in the UK – or performance fees. These can double the actual charges that investors bear on a fund that beats its benchmark, and that can often be a very low hurdle – such as beating the return on cash.

What’s particularly odd in the UK open-ended funds industry is that investors are charged more, rather than less, when a fund gets bigger.

Looking at this globally, funds domiciled in the US with assets under management (AUM) of between $400 million and $1 billion have an average TER of 1.27 per cent. In the UK it is 1.65 per cent. In the US, France and Germany, TERs fall when AUM are greater than $1 billion. In the UK they go up.

David Norman, chief executive of TCF Investment, points out: ‘In a retail market this is unique.’

What’s also rather strange is that the average TER on a UK-domiciled fund has increased over the decade – from 1.52 per cent in 2000 to 1.7 per cent in 2010. That’s despite the fact that assets the funds industry manage have grown from £250 billion to around £600 billion.

Even investors in funds that are doing relatively well – by beating their peers – may not have much to pat themselves on the back about. That’s because a lot of the dirt in the funds industry gets swept under the carpet. In the 10 years to 2009, 2,507 funds were launched – but 2,400 funds were closed or merged into other funds and their performance records erased from the average.

So the net activity – launches minus closures and mergers – amounted to 107 funds. Perhaps that is one of the reasons that TERs  have risen by so much.

So who is benefiting? Norman, who contends that the sheer complexity of fund charges effectively allows for price-fixing in the industry, thinks that only an official inquiry can unearth what’s really going on. When Paul (now Lord) Myners was asked to investigate the institutional investment market, one of the most important outcomes was the banning of soft commissions to stockbrokers.

Norman is calling for a similar review of the retail investment  industry. At the very least the Financial Services Authority  should force investment managers to publish tables that detail an investor’s total cost of fund ownership.

Good fund performance is to be welcomed and managers congratulated when they achieve it. However, as Ed Moisson, head of UK research at Lipper, says: ‘It is true that if performance is good enough it can outweigh the effect of higher charges, but the problem with performance is that it is impossible to predict, whereas costs are known in advance, so to ignore them completely might be foolhardy.’

That’s certainly true, but the trouble is that we don’t really know what the true cost of investing is. We need an official investigation to help us get to the bottom of it.