Unbundling the Expense Ratio: Hidden Distribution Costs in European Mutual Fund Markets

27 Pages Posted: 2 Sep 2016

See all articles by Marco A. Navone

Marco A. Navone

Finance Discipline Group - UTS Business School; Bocconi University - CAREFIN - Centre for Applied Research in Finance; Financial Research Network (FIRN)

Giacomo Nocera

Audencia Business School

Date Written: September 2016

Abstract

Using data on more than 5,000 mutual funds domiciled in four European countries in 2006, we investigate whether distribution costs embedded into the expense ratio can be held responsible for the differences of expense ratios of mutual funds in different countries. We confirm the existence of relevant country effects in the pricing of mutual fund management services. Comparing load and no‐load funds and using survey data on fee retrocession to the distribution channel, we provide evidence that these effects are heavily influenced by the cost of the distribution embedded in the expense ratio.

Keywords: mutual funds, expense ratios, distribution costs

Suggested Citation

Navone, Marco A. and Nocera, Giacomo, Unbundling the Expense Ratio: Hidden Distribution Costs in European Mutual Fund Markets (September 2016). European Financial Management, Vol. 22, Issue 4, pp. 640-666, 2016, Available at SSRN: https://ssrn.com/abstract=2833620 or http://dx.doi.org/10.1111/eufm.12078

Marco A. Navone (Contact Author)

Finance Discipline Group - UTS Business School ( email )

Haymarket
Sydney, NSW 2007
Australia

Bocconi University - CAREFIN - Centre for Applied Research in Finance

Via Sarfatti, 25
Milan, 20136
Italy

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Giacomo Nocera

Audencia Business School ( email )

8 route de la Jonelière, BP 31222
Nantes Cedex 3, Cedex 3 44312
France

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