There are some good mutual funds out there, and they can perform well even with high MERs.
One example that comes to mind is Beutel Goodman Small Cap (1.49% MER). Its 5 year performance is 9.68% per year. Compare that to the low fee index ETF, iShares XCS, which only returned 2.31%. No contest! I bring up this example because Canadian small caps are another specialized area where a good manager adds value.
Straying off topic, but the 15 year performance of Beutel Goodman Small Cap is a whopping 10.23% per year. The only thing that repelled me from this fund was the front end load (or is it another load)? Those confuse the heck out of me. It might still be worth holding despite that.