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File name: SSRN-id2205094. ; Size: 377K
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It Pays to Set the Menu: Mutual Fund Investment Options in 401(K) Plans
Veronika Krepely Pool
Indiana University Bloomington - Department of Finance
Clemens Sialm
University of Texas at Austin - McCombs School of Business; National Bureau of Economic Research (NBER)
Irina Stefanescu
Indiana University, Bloomington - Finance
January 20, 2013
Abstract:
This paper investigates whether mutual fund families acting as trustees of 401(k) plans display favoritism toward their own funds. Using a hand-collected dataset on retirement investment options, we show that poorly-performing funds are less likely to be removed from and more likely to be added to a 401(k) menu if they are affiliated with the plan trustee. We find no evidence that plan participants undo this affiliation bias through their investment choices. Finally, the subsequent performance of poorly-performing affiliated funds indicates that these trustee decisions are not information driven and are costly to retirement savers.
Number of Pages in PDF File: 53
Keywords: 401(k), pension plans, trustee, favoritism, mutual funds
JEL Classification: G23, J23
working papers series
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Date posted: July 19, 2012
; Last revised: January 23, 2013
Suggested CitationPool, Veronika Krepely, Sialm, Clemens and Stefanescu, Irina, It Pays to Set the Menu: Mutual Fund Investment Options in 401(K) Plans (January 20, 2013). Available at SSRN: http://ssrn.com/abstract=2112263 or http://dx.doi.org/10.2139/ssrn.2112263
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