Not Available for Download

What Drives Market Share in the Mutual Fund Industry

Review of Finance, Forthcoming

Posted: 1 Nov 2011  

Ajay Khorana

Georgia Institute of Technology - Finance Area

Henri Servaes

London Business School; Centre for Economic Policy Research (CEPR)

Date Written: September 1, 2011


This article examines competition and investor behavior in the mutual fund industry for the universe of US mutual funds during 1976-2009. Over this period, industry assets increased by a factor of 200, the number of active fund families quadrupled, and the average market share of a family declined by four-fifths. We find that price competition and product differentiation are both effective strategies in obtaining market share. Families that pass along economies of scale to investors and those that charge lower fees than the competition gain market share, but only if these fees are above average to begin with. Loads and 12b-1 fees, however, have a positive effect on market share, consistent with the use of these types of fees for marketing and distribution. Families that perform better, offer a wider range of products, and start more funds relative to the competition (a measure of innovation) also have a higher market share. Innovation is rewarded more if the new fund is more differentiated from existing offerings. Overall, our evidence suggests that mutual fund families compete effectively along both price and non-price dimensions.

Keywords: mutual funds, market share, price competition, product differentiation

JEL Classification: G23, G21, G28

Suggested Citation

Khorana, Ajay mname and Servaes, Henri mname, What Drives Market Share in the Mutual Fund Industry (September 1, 2011). Review of Finance, Forthcoming . Available at SSRN:

Ajay Khorana

Georgia Institute of Technology - Finance Area ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-5110 (Phone)
404-894-6030 (Fax)

Henri Servaes (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom
+44 20 7000 8268 (Phone)
+44 20 7000 8201 (Fax)


Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Paper statistics

Abstract Views