Mutual Fund Heterogeneity and Fee Dispersion

Abstract

The purpose of this study is to discuss research that identifies heterogeneous mutual fund and investor attributes and relations that explain dispersion in fund fees. One might think there is a short list of attributes and relations, such as high versus low expense ratios, that tells the full story of fund fee dispersion, but the story is much more complicated and nuanced. The research topics discussed are not inclusive of heterogeneous fund and investor attributes and relations that generate dispersions in fund fees, but they do provide this depth within their particular research domains.

The topics discussed related to this research are as follows: 1) disproportionate fee spreads and fund agency conflicts and services; 2) fee dispersion and heterogeneity in decisions concerning fund and investor attributes; 3) fee dispersion and strategic pricing in actively managed funds; 4) fee markups within fee-setting scenarios; 5) fee dispersion and market segmentation; and 6) fee dispersion and heterogeneity in board and sponsor decisions. The final, more traditional discussion discussion reviews factors affecting fund expense ratios over time.

JEL Classification: G2, G23, G28