Negative General Effects on Mutual Fund Shareholder Performance

Abstract

The study provides selected “negative general effects” that lower mutual fund shareholder performance. First, ICA and federal court decisions have enabled generally higher fund fees by setting very high hurdles for shareholders in petitions of excessive fund fees, which implicitly reduce general shareholder ability to make information efficient, less costly, and more profitable fund choices.

Second, ICA “outsourcing” of regulatory oversight of mutual fund advisers to independent directors provides inherent agency conflicts of interest in serving as “shareholder watchdogs,” which implicitly reduce general shareholder ability to make information efficient, less costly, and more profitable fund choices.

Third, mutual fund advisers and legal and regulatory requirements do not provide “normative transparency of disclosure” to fund shareholders, which implicitly reduce general shareholder ability to make information efficient, less costly, and more profitable fund choices.

Fourth, mutual fund advisers do not provide independent directors with “normative transparency of information” that would enable them better to serve shareholder interests, which implicitly reduce general shareholder ability to make information efficient, less costly, and more profitable fund choices.

Keywords: mutual funds, shareholder performance, ICA, court decisions, outsourcing regulatory oversisght, shareholder watchdogs, normative transparency of disclosure, normative transparency of information, independent directors.fund advisers. excessive fund fees

JEL Classification: G2, G23, G28