The Mutual Fund Fee Puzzle
53 Pages Posted: 18 Aug 2009 Last revised: 15 Oct 2016
Date Written: October 13, 2016
Previous work shows large differences in fees for S&P500 index funds. We expand this work to compare fees across all US equity funds using two methods, regression-based pricing models and holdings-based fund matching, to control for fund heterogeneity. We find economically large, robust, persistent and pervasive fee dispersion in the mutual fund industry. Importantly, fee dispersion exists among the largest funds (top TNA quintile) as well as among institutional funds. Most surprisingly, fee dispersion has noticeably increased over the last twenty years, even as the industry has experienced enormous growth in capital invested and the number of funds.
Keywords: Mutual Funds, Fund Fees, Price Dispersion, Price Persistence
JEL Classification: G10, G11, G23
Suggested Citation: Suggested Citation