It's not so much that you are paying only for algorithmic/mechanical money management, but there are transaction costs as well. For example, an fund that tracks a particular index will need to buy/sell as the composition of the index changes. Even without that, you still have contributions and redemptions to deal with. Ideally, you try to match redemptions with contributions dollar for dollar, but they won't always match up, resulting purchasing or selling stock (which incurs transaction fees). Of course, there's the administrative overhead of managing a fund (keeping records, filing reports, etc.). As such, you aren't just paying for the algorithm.