A pension fund manager compensated only based on performance earned $1

In Favor:

If the fund manager's compensation is capped, then his incentive to increase performance is also capped. One he reaches the necessary level to get $200,000 in compensation, he has no incentive to go further. By removing this cap, you increase incentives to perform and thus increase returns to the fund before compensation if subtracted.

Against:

The fund manager's pay might be tied to performance but that doesn't mean its is reflective of the value they add. Other fund managers might be able to perform similarly but slightly lower at a far lower cost. Thus what matters is not outright performance, but relative performance. It can be argued that few fund managers ever add $1.4 million in value since the market is too efficient and thus compensation should be decreased.