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File name: SSRN-id2220161. ; Size: 354K
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The Mutual Fund Industry Worldwide: Explicit and Closet Indexing, Fees, and Performance
Martijn Cremers
University of Notre Dame
Miguel A. Ferreira
Nova School of Business and Economics; European Corporate Governance Institute (ECGI)
Pedro P. Matos
University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)
Laura T. Starks
University of Texas at Austin - Department of Finance
February 13, 2013
Abstract:
We examine the causes and consequences of indexing for active management by equity mutual funds worldwide. Explicit indexing is rare in countries with weaker regulation and less liquid stock markets, but many actively managed funds engage in closet indexing. We find that funds are more active and charge lower fees when they face more competitive pressure from explicitly indexed funds. Moreover, truly active funds generate higher risk-adjusted net returns than closet indexers. Overall, we conclude that explicit indexing improves the levels of competition and efficiency of the mutual fund industry in a country.
Number of Pages in PDF File: 71
Keywords: Mutual funds, Active management, Index funds, Exchange-traded funds, Competition, Fees, Performance
JEL Classification: G15, G18, G23
working papers series
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Date posted: May 3, 2011
; Last revised: February 20, 2013
Suggested CitationCremers, Martijn, Ferreira, Miguel A., Matos, Pedro P. and Starks, Laura T., The Mutual Fund Industry Worldwide: Explicit and Closet Indexing, Fees, and Performance (February 13, 2013). Available at SSRN: http://ssrn.com/abstract=1830207 or http://dx.doi.org/10.2139/ssrn.1830207
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