Managing Mutual Funds or Managing Expense Ratios? Evidence from the Greek Fund Industry

Abstract

This study examines the expenses' policy of the domestic equity funds in a small emerging market, Greece, with an oligopolistic, bank dominated financial system as it grows to maturity. Constructing a unique dataset of the non-publicly available expense ratios charged by these funds, we examine the impact these expenses have on the funds' performance and flows. The main conclusion is that the funds' performance is negatively related to expenses, while investors' flows are not directly affected by expenses. Furthermore, the funds affiliated with one of the three major domestic banking groups achieve higher performance and attract higher net flows in comparison to their competitors.

Keywords: Mutual funds, Expense ratio, Emerging markets, Performance attributes

JEL Classification: G14, G15, G21, G23