Are Mutual Fund Expenses Too High? A Commentary

8 Pages Posted: 19 Jun 2012 Last revised: 1 Mar 2016

See all articles by John A. Haslem

John A. Haslem

University of Maryland - Robert H. Smith School of Business; University of Maryland - Robert H. Smith School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: April 5, 2004

Abstract

The mutual funds industry does not compete on price. Mutual fund managers are the primary beneficiaries of fund economies of scale. Mutual fund managers charge too much for management fees. Multiple share class funds have higher management fees and total expenses than single class funds. "Mutual" mutual funds management at cost is much more cost efficient than the industry's external governance structure. Distribution from mutual fund supermarkets is not "free," but is paid from fund assets. Fund managers differ significantly in the amount of expenses they charge to fund assets. Mutual funds with different major characteristics, such as investment style, differ in their expenses. Regardless of trend, mutual fund expenses are too high. And, finally, 12b-1 fees, soft dollar arrangements, and directed brokerage and revenue sharing agreements are improperly costly to fund shareholders and should be prohibited.

Keywords: mutual fund expeneses, non-price competition, economies of scale, multiple share classes, management fees, mutual mutual funds, distribution, supermarkets, investment style

JEL Classification: G2, G23, G28

Suggested Citation

Haslem, John A. and Haslem, John A., Are Mutual Fund Expenses Too High? A Commentary (April 5, 2004). Available at SSRN: https://ssrn.com/abstract=2086546 or http://dx.doi.org/10.2139/ssrn.2086546

John A. Haslem (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

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University of Maryland - Robert H. Smith School of Business ( email )

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United States
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