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Do fees matter? Investor’s sensitivity to active management fees

Author

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  • Døskeland, Trond
  • Sjuve, André Wattø
  • Ørpetveit, Andreas

Abstract

Following the framework established by Berk and Green (2004), mutual fund inflows and fees should be uncorrelated at equilibrium. We empirically explore this relationship by investigating the temporal changes in fund fees and flows. Our fee metrics focus on active management services rather than diversification. We analyze the additional fee compared to passive alternatives and additional fee per unit of active management, along with the traditionally used total fee. Our analysis of global data reveals a negative time series correlation between both measures of active management fee and fund flows.

Suggested Citation

  • Døskeland, Trond & Sjuve, André Wattø & Ørpetveit, Andreas, 2025. "Do fees matter? Investor’s sensitivity to active management fees," Journal of Empirical Finance, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:empfin:v:81:y:2025:i:c:s0927539825000180
    DOI: 10.1016/j.jempfin.2025.101596
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    Keywords

    Mutual funds; Active portfolio management; Fund flows;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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