The Efficiency of Performance‐Based Fee Funds

31 Pages Posted: 16 Sep 2014

See all articles by Ana Diaz-Mendoza

Ana Diaz-Mendoza

Universidad del País Vasco (UPV/EHU)

Germán López-Espinosa

University of Navarra

Miguel Angel Martínez

Universidad del País Vasco (UPV/EHU)

Date Written: September 2014

Abstract

This paper compares the efficiency of mutual funds that charge management fees based totally or partially on returns (performance) with those that charge them exclusively on assets under management. We analyse Spanish risky mutual funds during 1999–2009 for which both types of management fees are authorised. We find that performance‐based fee funds perform significantly better than the other risky funds considered. Moreover, a strongly positive performance‐expenses relation is found for such funds, and negative for the other. These results seem to indicate more efficient management in performance‐based fee funds, in contrast with their low presence in the fund industry.

Keywords: risk‐adjusted performance, expenses, efficiency, evaluation models

Suggested Citation

Diaz-Mendoza, Ana and López-Espinosa, Germán and Martínez, Miguel Angel, The Efficiency of Performance‐Based Fee Funds (September 2014). European Financial Management, Vol. 20, Issue 4, pp. 825-855, 2014. Available at SSRN: https://ssrn.com/abstract=2496686 or http://dx.doi.org/10.1111/j.1468-036X.2012.00654.x

Ana Diaz-Mendoza (Contact Author)

Universidad del País Vasco (UPV/EHU) ( email )

Leioa, 48940
Spain

Germán López-Espinosa

University of Navarra ( email )

Facultad de Ciencias Económicas y Empresariales
Edificio Amigos
Pamplona, Navarra 31080
Spain
+34 948425600 (Phone)
+34 948425626 (Fax)

Miguel Angel Martínez

Universidad del País Vasco (UPV/EHU) ( email )

Leioa, 48940
Spain

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