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Forced to be Active: Evidence from a Regulation Intervention

Author

Listed:
  • Petter Bjerksund

    (Norwegian School of Economics, 5045 Bergen, Norway)

  • Trond Døskeland

    (Norwegian School of Economics, 5045 Bergen, Norway)

  • André Wattø Sjuve

    (Norwegian School of Economics, 5045 Bergen, Norway)

  • Andreas Ørpetveit

    (Norwegian School of Economics, 5045 Bergen, Norway)

Abstract

Mutual funds known as closet indexers are marketed as active but actually operate as low-activity funds. Investors end up paying for full service but receiving only a part of it. Supervisory authorities around the world are considering ways to regulate these funds. In this context, we examine the impact of regulatory interventions by Scandinavian regulators. We compare the scrutinized Scandinavian funds with similar unaffected European funds. The findings suggest that the regulated Scandinavian funds preferred increased activity over fee reduction. Consequently, fund managers adopted more active management strategies, resulting in a significant 2% decrease in annual alpha. Therefore, the regulatory interventions resulted in unfavorable outcomes for investors.

Suggested Citation

  • Petter Bjerksund & Trond Døskeland & André Wattø Sjuve & Andreas Ørpetveit, 2026. "Forced to be Active: Evidence from a Regulation Intervention," Management Science, INFORMS, vol. 72(5), pages 4341-4358, May.
    • Handle: RePEc:inm:ormnsc:v:72:y:2026:i:5:p:4341-4358
    DOI: 10.1287/mnsc.2023.03124
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    References listed on IDEAS

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