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Regulation And The Rise In Asset‐Based Mutual Fund Management Fees
Author(s) -
Golec Joseph
Publication year - 2003
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/1475-6803.00042
Subject(s) - management fee , mutual fund , business , closed end fund , performance fee , finance , index fund , open end fund , asset management , unit trust , fund administration , target date fund , fund of funds , commission , investment fund , asset (computer security) , competition (biology) , investment management , manager of managers fund , assets under management , institutional investor , economics , fixed asset , corporate governance , production (economics) , ecology , computer security , macroeconomics , market liquidity , computer science , biology
In this article I explain why asset‐based fees are common for mutual fund management companies and why the average fee has increased recently. I argue that Securities and Exchange Commission fee regulations make alternative fee types illegal or unattractive. Management companies can maintain higher fees because regulations and brand‐name capital partly insulate them from competition and because investors cannot easily distinguish between performance‐oriented and marketing‐oriented fund companies. Index funds and unit investment trusts may offer competition to mutual funds in the future because they are designed to minimize management fees.