Regulation and the Rise in Asset-Based Mutual Fund Management Fees
Posted: 28 Mar 2002
In this article I explain why asset-based fees are so common for mutual fund management companies and why the average fee has increased recently. I argue that Securities and Exchange Commission fee regulations make alternative fee types illegal or unattractive. Management companies can maintain higher fees because regulations and brand-name capital partly insulate them from competition, and because investors' cannot easily distinguish between performance-oriented and marketing-oriented fund companies. Index funds and unit investment trusts may offer competition to mutual funds in the future because they are designed to minimize management fees.
JEL Classification: G2, M52, K22
Suggested Citation: Suggested Citation