S&P 500 Index Mutual Funds: Diverse Expenses and Performance Characteristics

Abstract

For investor and institutional class index mutual funds that track the S&P 500 Index, there are just 25 funds with statistically low expense ratios (management fee findings are found above). However, there are only five index funds - all investor class - with statistically very high and extremely high expense ratios. Thus, these results contain both bad and good news for investors.

Unfortunately, the complete story of high expense ratios for S&P 500Index funds finds more bad news. The Sharpe ratio, Jensen’s alpha, annualized total return, Morningstar Star ratings, and average net assets are all statistically, negatively correlated with index funds with statistically high expense ratios. Further, portfolio turnover and 12b-1 fees are statistically, positively correlated with index funds with statistically high expense ratios.

Keywords: mutual funds, S&P 500 index funds, expense ratios, Sharpe ratio, Jensen alpha, star ratings, portfolio turnover, 12b-1 fees

JEL Classification: G2, G23, G28