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Mutual Fund Revenue Sharing in 401(k) Plans

Author

Listed:
  • Veronika K. Pool
  • Clemens Sialm
  • Irina Stefanescu

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.

Suggested Citation

  • Veronika K. Pool & Clemens Sialm & Irina Stefanescu, 2022. "Mutual Fund Revenue Sharing in 401(k) Plans," NBER Working Papers 30721, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30721
    Note: AG AP CF PE
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    More about this item

    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
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G50 - Financial Economics - - Household Finance - - - General
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare

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