Mutual Fund Market Structure and Company Fee Competition: Theory and Evidence

101 Pages Posted: 21 May 2023 Last revised: 17 Aug 2023

Date Written: August 17, 2023

Abstract

We investigate whether competition between the fund companies that offer mutual funds constrains individual fund fees. We document that a substantial fraction of individual fund fee variation is explained by company-wide components. Moreover, we show using SEC prospectus download data that company-level attributes influence investors' consideration of companies. We connect these facts with a model of fee competition between co-considered fund companies, characterising the competitive landscape and associated equilibrium fees. Calibrating the model, we derive a testable prediction for competitively constrained fees. The prediction successfully explains cross-sectional variation in company-level average fees, identifying the influence of company competition on fees.

Keywords: Competition Network, Fee Dispersion, EDGAR, Consideration, Differentiation

JEL Classification: G20, D40, G11, D12, L10

Suggested Citation

Grice, Richard and Guecioueur, Ahmed, Mutual Fund Market Structure and Company Fee Competition: Theory and Evidence (August 17, 2023). Available at SSRN: https://ssrn.com/abstract=4449026 or http://dx.doi.org/10.2139/ssrn.4449026

Richard Grice

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

Ahmed Guecioueur (Contact Author)

INSEAD ( email )

Boulevard de Constance
Fontainebleau, 77300
France

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