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Market penetration strategies and the fee--performance relationship: the case of Spanish money mutual funds

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  • Luis Muga
  • Rafael Santamaria

Abstract

This article shows that market penetration strategies are common practice during the product introduction stage in the money mutual funds in Spain. During this stage there is no relation between fees and performance because this strategy is optimal. In order to analyse this relationship during the other stages of the product life cycle, funds under three years old were omitted from the analysis. Among the remaining funds, those with the highest fees are found to present a higher gross return than the low-fee funds, although the difference is not statistically significant. Nevertheless, in terms of net returns, low-fee funds are observed to stochastically dominate high-fee funds for any risk-averse investor. These findings hold for any managerial skill level or segmentation by the mutual fund family type.

Suggested Citation

  • Luis Muga & Rafael Santamaria, 2008. "Market penetration strategies and the fee--performance relationship: the case of Spanish money mutual funds," The Service Industries Journal, Taylor & Francis Journals, vol. 30(9), pages 1529-1547, September.
    • Handle: RePEc:taf:servic:v:30:y:2008:i:9:p:1529-1547
    DOI: 10.1080/02642060802626816
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    1. Isabel Abinzano & Luis Muga & Rafael Santamaria, 2016. "The Role of Investor Type in the Fee Structures of Pension Plans," Journal of Financial Services Research, Springer;Western Finance Association, vol. 50(3), pages 387-417, December.

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