Mutual Fund Brokerage Commissions
AbstractThe brokerage commissions paid for portfolio transactions by a large sample of equity mutual funds are investigated. Median brokerage commissions measured as a percentage of net assets are 21 basis points per year with a standard deviation of 27 basis points. The commission levels are negatively correlated with fund size and positively correlated with fund turnover and expense ratio. The average brokerage commission measured as a percentage of assets traded exceeds the typical execution-only commissions for large institutional traders. This finding is consistent with many mutual fund brokerage commissions including payments for research, so-called soft dollar payments. Funds' expense ratios are positively correlated with commissions per trade, inconsistent with the idea that mutual fund managers who pay soft dollars for research have a corresponding reduction in management fees.
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Bibliographic InfoArticle provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.
Volume (Year): 19 (1996)
Issue (Month): 2 (Summer)
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