Mutual Fund Heterogenity and Fee Dispersion

30 Pages Posted: 2 Mar 2013 Last revised: 11 Mar 2016

See all articles by John A. Haslem

John A. Haslem

University of Maryland - Robert H. Smith School of Business; University of Maryland - Robert H. Smith School of Business

Date Written: April 4, 2014

Abstract

The purpose of this study is to discuss research that identifies heterogeneous mutual fund and investor attributes and relations that explain dispersion in fund fees. One might think there is a short list of attributes and relations, such as high versus low expense ratios, that tells the full story of fund fee dispersion, but the story is much more extensive and nuanced. The research topics discussed are not inclusive of heterogeneous fund and investor attributes and relations that generate dispersions in fund fees, but they do provide depth within particular research domains.

Select findings for discussions of factors influencing dispersion of mutual fund fees include: (1) Fund competition and agency conflicts importantly determine fund pricing; (2) Fee dispersion primarily arises from heterogeneity of products, clienteles, and production functions; (3) Negative relations between fees and performance is due to fund strategic fee-setting and investor sensitivity to performance; (4) Investor perceptions of fund markets are key to fund fee-setting mechanisms; (5) Funds segment investors by level of investment sophistication and sell high cost funds to less-knowledgeable investors; and (6) Fees are lower with small sized boards, boards with relatively more independent directors, and relatively more directors sitting on large proportions of other sponsor funds.

Keywords: mutual funds, fees, strategic fee setting, performance sensitivity, excessive fees, multiple share

JEL Classification: G2, G23, G28

Suggested Citation

Haslem, John A. and Haslem, John A., Mutual Fund Heterogenity and Fee Dispersion (April 4, 2014). Available at SSRN: https://ssrn.com/abstract=2226643 or http://dx.doi.org/10.2139/ssrn.2226643

John A. Haslem (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

5901 MacArthur Blvd NW 124
Washington, DC DC 20016
United States
202-236 3172 (Phone)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742
United States
202-387 2025 (Phone)

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