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Mutual Find Fee-Setting, Market Structure and Mark-Ups

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  • Luo, Guo Ying

Abstract

This paper develops a model to examine how mutual funds set fees charged to investors within a context of non-competitive market structure. The empirical evidence shows that the performance, age, size and cash ratio of the fund have statistically significant impacts on the mutual fund fees but, quantitatively, the majority of the fee is explained by mark-ups that funds add to the marginal cost owing to the market power possessed by the funds. Front-end load funds have the highest mark-ups, the back-end funds have the second highest, and no-load funds have the lowest mark-up. Copyright 2002 by The London School of Economics and Political Science

Suggested Citation

  • Luo, Guo Ying, 2002. "Mutual Find Fee-Setting, Market Structure and Mark-Ups," Economica, London School of Economics and Political Science, vol. 69(274), pages 245-271, May.
    • Handle: RePEc:bla:econom:v:69:y:2002:i:274:p:245-71
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    Cited by:

    1. Agarwal, Vikas & Ray, Sugata, 2011. "Determinants and implications of fee changes in the hedge fund industry," CFR Working Papers 11-09, University of Cologne, Centre for Financial Research (CFR).
    2. Tran-Dieu, Linh, 2015. "How do mutual funds transfer scale economies to investors? Evidence from France," Research in International Business and Finance, Elsevier, vol. 34(C), pages 66-83.
    3. Frey, Stefan & Herbst, Patrick, 2014. "The influence of buy-side analysts on mutual fund trading," Journal of Banking & Finance, Elsevier, vol. 49(C), pages 442-458.
    4. Abinzano, I. & Muga, L. & Santamaria, R., 2017. "Bad company. The indirect effect of differences in corporate governance in the pension plan industry," International Review of Financial Analysis, Elsevier, vol. 54(C), pages 63-75.
    5. Gil Bazo, Javier & Martínez Sedano, Miguel Ángel, 2004. "The Black Box of Mutual Fund Fees," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.

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