Topics in Mutual Fund Revenue Sharing

20 Pages Posted: 23 May 2016 Last revised: 3 Nov 2019

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 5, 2016

Abstract

In conclusion, Haslem [2016] summarizes the numerous attributes and implications of revenue sharing payments: (1) reward brokers for high and higher sales and/or asset holdings of fund shares and further defray current and higher broker costs of advertising and promotion, ongoing broker servicing of fund investor accounts, and educational support; (2) resulting higher broker sales increase fund assets under management (higher inflows) and profits; (3) higher broker sales of fund shares increase sales concessions and distribution fees; (4) higher assets under management increase trade size and broker commissions, trade execution, and profits; (5) “direct” payments from fund adviser “profits,“ but may be bundled in fund management fees paid to advisers who "write the checks"; (6) use of management fees to pay revenue sharing increases fund fee size and fund outflows; (7) brokers rebate “fall-out benefits” from "excess" revenue sharing payments directly to fund advisers; (8) fall-out benefits motivate higher revenue sharing payments and higher broker profits; (9) revenue sharing payments via management fees reduce current fund NAVs and shareholder returns; (9) most retail investors unaware of the existence, nature, and costs of revenue sharing payments; and (10) revenue sharing is agency conflicted with shareholder interests and returns.

Suggested Citation

Haslem, John A. and Haslem, John A., Topics in Mutual Fund Revenue Sharing (April 5, 2016). Available at SSRN: https://ssrn.com/abstract=2782842 or http://dx.doi.org/10.2139/ssrn.2782842

John A. Haslem (Contact Author)

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

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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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