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Regulation And The Rise In Asset-Based Mutual Fund Management Fees

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  • Joseph Golec

Abstract

In this article I explain why asset-based fees are common for mutual fund management companies and why the average fee has increased recently. I argue that Securities and Exchange Commission fee regulations make alternative fee types illegal or unattractive. Management companies can maintain higher fees because regulations and brand-name capital partly insulate them from competition and because investors cannot easily distinguish between performance-oriented and marketing-oriented fund companies. Index funds and unit investment trusts may offer competition to mutual funds in the future because they are designed to minimize management fees. 2003 The Southern Finance Association and the Southwestern Finance Association.

Suggested Citation

  • Joseph Golec, 2003. "Regulation And The Rise In Asset-Based Mutual Fund Management Fees," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 26(1), pages 19-30.
  • Handle: RePEc:bla:jfnres:v:26:y:2003:i:1:p:19-30
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    Citations

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    Cited by:

    1. Anolli, Mario & Del Giudice, Alfonso, 2008. "Italian Open End Mutual Fund Costs," MPRA Paper 8111, University Library of Munich, Germany.
    2. John Banko & Scott Beyer & Richard Dowen, 2010. "Economies of scope and scale in the mutual-fund industry," Managerial Finance, Emerald Group Publishing, vol. 36(4), pages 322-336, March.
    3. Jonathan Wiley, 2014. "Illiquidity Risk in Non-Listed Funds: Evidence from REIT Fund Exits and Redemption Suspensions," The Journal of Real Estate Finance and Economics, Springer, vol. 49(2), pages 205-236, August.
    4. Isabel Toledo & Rocío Marco, 2010. "Costs associated with mutual funds in Spain," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 15(2), pages 165-179.
    5. Ruiz-Verdú, Pablo & Gil-Bazo, Javier, 2006. "Yet another puzzle? the relation between price and performance in the mutual fund industry," DEE - Working Papers. Business Economics. WB wb066519, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    6. Gallaher, Steven & Kaniel, Ron & Starks, Laura T, 2015. "Advertising and Mutual Funds: From Families to Individual Funds," CEPR Discussion Papers 10329, C.E.P.R. Discussion Papers.
    7. Glode, Vincent, 2011. "Why mutual funds "underperform"," Journal of Financial Economics, Elsevier, vol. 99(3), pages 546-559, March.
    8. Justin Davis & G. Tyge Payne & Gary McMahan, 2007. "A Few Bad Apples? Scandalous Behavior of Mutual Fund Managers," Journal of Business Ethics, Springer, vol. 76(3), pages 319-334, December.
    9. Lioui, Abraham & Poncet, Patrice, 2013. "Optimal benchmarking for active portfolio managers," European Journal of Operational Research, Elsevier, vol. 226(2), pages 268-276.
    10. Paul G. Mahoney, 2004. "Manager-Investor Conflicts in Mutual Funds," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 161-182, Spring.
    11. Gil Bazo, Javier & Martínez Sedano, Miguel Angel, 2004. "The Black Box of Mutual Fund Fees," DFAEII Working Papers 2004-01, University of the Basque Country - Department of Foundations of Economic Analysis II.

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