Mutual Fund Mortality, 12b-1 Fees, and the Net Expense Ratio

Posted: 22 Apr 2005

See all articles by William P. Dukes

William P. Dukes

Texas Tech University - Rawls College of Business

Philip Campbell English

Texas Tech University - Rawls College of Business

Sean M. Davis

Government of the United States of America - Joint Economic Committee (JEC)

Abstract

The Securities and Exchange Commission is currently reviewing Rule 12b-1, which governs how fund advisors may pay for the distribution of fund shares. We provide evidence that even after adjusting for economies of scale, funds with 12b-1 fees have higher expense ratios net of the 12b-1 fees than do funds without such fees. This finding suggests that 12b-1 fees are more than just a deadweight cost. We also demonstrate that 12b-1 fees are highest for funds that ultimately fail, that the proportion of funds with 12b-1 fees is increasing over time, and that the level of those fees is also increasing over time.

Keywords: Mutual funds, 12b-1 fees, expense ratios

JEL Classification: G2, G28

Suggested Citation

Dukes, William P. and English, Philip Campbell and Davis, Sean M., Mutual Fund Mortality, 12b-1 Fees, and the Net Expense Ratio. Journal of Financial Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=704601

William P. Dukes

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States
806-742-3419 (Phone)
806-742-2099 (Fax)

Philip Campbell English (Contact Author)

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States

Sean M. Davis

Government of the United States of America - Joint Economic Committee (JEC) ( email )

G-01 Dirksen Senate Building
Washington, DC 20510
United States

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