29 Pages Posted: 2 Apr 2001
Date Written: undated
This paper compares the out-of-sample performance of no-load and load mutual funds. Unlike the pervious literature, this paper provides a more comprehensive analysis as it uses methodologies to incorporate loads directly into the returns, utilizes a large sample of funds free of survivorship bias, and evaluates performance across many different performance metrics and different ages and styles of funds. We find two important results. First, before adjusting for loads in the returns, no-load funds perform somewhat better than do load funds although the differences are often not significant. However, after adjusting for loads in the return data, no-load funds are found to perform much better than load funds, with the differences found to be significant at the 1 percent level across many different performance metrics. Such findings indicate that investors are giving up a significant amount in terms of performance to hold load funds. Second, we find that within load funds themselves there is no significant difference in out-of-sample performance between high-load funds and low-load funds even after adjusting for loads. Indeed, high-load funds perform only slightly better than do low-load funds before loads are accessed and only slightly worse after loads are accessed. For investors who are only interested in load funds this result suggests that that the amount of the load should not be of much importance when selecting funds.
Keywords: Mutual funds, loads, out-of-sample performance, load-adjusted returns
JEL Classification: G23
Suggested Citation: Suggested Citation
Morey, Matthew R., Should You Carry the Load? A Comprehensive Analysis of Load and No-Load Mutual Fund Out-of-Sample Performance (undated). Available at SSRN: https://ssrn.com/abstract=265133 or http://dx.doi.org/10.2139/ssrn.265133