Mutual Fund Revenue Sharing in 401(k) Plans

59 Pages Posted: 31 Dec 2020 Last revised: 11 Aug 2021

See all articles by Veronika Krepely Pool

Veronika Krepely Pool

Vanderbilt University - Finance

Clemens Sialm

University of Texas at Austin - McCombs School of Business; National Bureau of Economic Research (NBER)

Irina Stefanescu

Board of Governors of the Federal Reserve System

Date Written: May 20, 2021

Abstract

Recordkeepers in DC pension plans are often paid indirectly in the form of revenue sharing from third-party funds on the menu. We show that these arrangements affect the investment menu of 401(k) plans. Revenue-sharing funds are more likely to be added to the menu and are less likely to be deleted. Overall, revenue-sharing plans are more expensive as higher expense ratios are not offset by lower direct fees or by superior performance. Rebates increase with the market power of the recordkeeper suggesting that third-party funds may revenue share to gain access to retirement assets.

Keywords: 401(k) plans, retirement, providers, revenue sharing, mutual funds

JEL Classification: G23, J23

Suggested Citation

Pool, Veronika Krepely and Sialm, Clemens and Stefanescu, Irina, Mutual Fund Revenue Sharing in 401(k) Plans (May 20, 2021). Vanderbilt Owen Graduate School of Management Research Paper, Available at SSRN: https://ssrn.com/abstract=3752296 or http://dx.doi.org/10.2139/ssrn.3752296

Veronika Krepely Pool

Vanderbilt University - Finance ( email )

United States
615-343-0277 (Phone)

Clemens Sialm

University of Texas at Austin - McCombs School of Business ( email )

Austin, TX 78712
United States

HOME PAGE: http://faculty.mccombs.utexas.edu/Clemens.Sialm/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Irina Stefanescu (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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