Sales Compensation and Recommendations As the Fund of the Month

22 Pages Posted: 23 Jul 2019

See all articles by Yoon Hae Oh

Yoon Hae Oh

Korea Development Institute (KDI)

Date Written: May 31, 2019

Abstract

This study analyzes whether mutual fund distributors are more likely to recommend products with higher sales compensation to maximize their profit. The lists of the ‘fund of the month’ on their webpages are utilized from April of 2015 to August of 2015. A simple comparative analysis shows that the average sales fees and the average front-end load are significantly higher in the recommended funds among the A share class of domestic equity funds. The results of a regression analysis confirm that funds with high sales compensation levels are more likely to be recommended. This holds true for both domestic equity funds and hybrid bond funds even after controlling for fund age, fund size, and past returns.

Keywords: Mutual Fund, Sales Compensation, Conflict of Interest

JEL Classification: G20, G24, G28

Suggested Citation

Oh, Yoon Hae, Sales Compensation and Recommendations As the Fund of the Month (May 31, 2019). KDI Journal of Economic Policy 2019, 41(2):59–79, Available at SSRN: https://ssrn.com/abstract=3423778

Yoon Hae Oh (Contact Author)

Korea Development Institute (KDI) ( email )

263 Namsejong-ro
Sejong-si 30149
Korea, Republic of (South Korea)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
15
Abstract Views
239
PlumX Metrics