Download or read book The Mutual Fund Industry written by R. Glenn Hubbard and published by Columbia University Press. This book was released on 2010-04-01 with total page 252 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mutual funds form the bedrock of retirement savings in the United States, and, considering their rapid growth, are sure to be more critical in the future. Because the size of fees paid by investors to mutual fund advisers can strongly affect the return on investment, these fees have become a contentious issue in Congress and the courts, with many arguing that investment advisers grow rich at the expense of investors. This ground-breaking book not only conceptualizes a new economic model of the mutual fund industry, but also uses this model to test for price competition between investment advisers, evaluating the assertion that market forces fail to protect investors' returns from excessive fees. Highly experienced authors track the growth of the industry over the past twenty-five years and present arguments and evidence both for and against theories of adviser malfeasance. The authors review the regulatory history of mutual fund fees and summarize leading case decisions addressing excessive fees. Revealing the extent to which the governance structure of mutual funds truly impacts fund performance, this book provides the best understanding of today's mutual fund industry and is a vital tool for investors, money managers, fund directors, securities lawyers, economists, and anyone concerned with the regulation of mutual funds.
Download or read book The Economics of Mutual Fund Markets Competition Versus Regulation written by William Baumol and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 250 pages. Available in PDF, EPUB and Kindle. Book excerpt: The original impetus for this research was provided several years ago by a request to assist Counsel for Fidelity Management and Research Corporation in analyzing the mutual fund industry, with particular emphasis on money market mutual funds. We were asked to focus our efforts on the mechanism by which the advisory fees of mutual funds are determined. This request arose out of litigation that challenged the level of advisory fees charged to the shareholders of the Fidelity Cash Reserve Fund. Subsequently, we were asked to provide similar assistance to Counsel for T. Rowe Price Associates regarding the fees charged to shareholders of their Prime Reserve Fund. 1940, advisers of Under the Investment Company Act of mutual funds have a fiduciary duty with respect to the level of fees they may charge a fund's shareholders. Since the passage of the Investment Company Act, there have been numerous lawsuits brought by shareholders alleging that advisory fees were excessive. In these lawsuits, the courts have failed to provide a set of standards for determining when such fees are excessive. Instead, they have relied on arbitrary and frequently ill-defined criteria for jUdging the reasonableness of fees. This failure to apply economic-based tests for evaluating the fee structure of mutual funds provided the motivation for the present book, which undertakes a comprehensive analysis of the economics of the mutual fund industry.
Download or read book Price Competition in the Mutual Fund Industry written by Sitikantha Parida and published by . This book was released on 2017 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We find a puzzling fact about the mutual fund industry that funds operating in more competitive segments charge higher fees. We argue that this surprising positive relation between competition and fund fees is consistent with strategic fee setting by funds. Fund performance is better and more persistent in less competitive segments, which attracts relatively more performance-sensitive investors. This leaves relatively less performance-sensitive investors in more competitive markets. Hence, funds operating in more competitive markets face a relatively inelastic demand curve and take advantage of it by increasing their fees (which reduces investors' net returns). Our findings have important policy implications that market competition on its own may not be sufficient to decrease the fund fees and that regulatory interventions are required to increase investor awareness of mutual fund fees and their adverse impacts on net fund performance.
Download or read book Improving Price Competition for Mutual Funds and Bonds written by United States. Congress. House. Committee on Commerce. Subcommittee on Finance and Hazardous Materials and published by . This book was released on 1998 with total page 160 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Product Differentiation Search Costs and Competition in the Mutual Fund Industry written by and published by . This book was released on 2003 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Economics of Mutual Fund Markets Competition Versus Regulation written by William Baumol and published by Springer. This book was released on 1989-12-31 with total page 242 pages. Available in PDF, EPUB and Kindle. Book excerpt: The original impetus for this research was provided several years ago by a request to assist Counsel for Fidelity Management and Research Corporation in analyzing the mutual fund industry, with particular emphasis on money market mutual funds. We were asked to focus our efforts on the mechanism by which the advisory fees of mutual funds are determined. This request arose out of litigation that challenged the level of advisory fees charged to the shareholders of the Fidelity Cash Reserve Fund. Subsequently, we were asked to provide similar assistance to Counsel for T. Rowe Price Associates regarding the fees charged to shareholders of their Prime Reserve Fund. 1940, advisers of Under the Investment Company Act of mutual funds have a fiduciary duty with respect to the level of fees they may charge a fund's shareholders. Since the passage of the Investment Company Act, there have been numerous lawsuits brought by shareholders alleging that advisory fees were excessive. In these lawsuits, the courts have failed to provide a set of standards for determining when such fees are excessive. Instead, they have relied on arbitrary and frequently ill-defined criteria for jUdging the reasonableness of fees. This failure to apply economic-based tests for evaluating the fee structure of mutual funds provided the motivation for the present book, which undertakes a comprehensive analysis of the economics of the mutual fund industry.
Download or read book Product Differentiation Search Costs and Competition in the Mutual Fund Industry written by Ali Hortacsu and published by . This book was released on 2010 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt: Two salient features of the competitive structure of the U.S. mutual fund industry are the large number of funds and the sizeable dispersion in the fees funds charge investors, even within narrow asset classes. Portfolio financial performance differences alone do not seem able to fully explain these features. We investigate whether non-portfolio fund differentiation and information/search frictions also play a role in creating these observed industry characteristics. We focus on their impact in a case study of the retail Samp;P 500 index funds sector. We find that fund proliferation and price dispersion also exist in this sector, despite the funds' financial homogeneity. Furthermore, there was a marked shift in sector assets to more expensive (often newly entered) funds throughout our sample period. Our analysis indicates that these observations are consistent with the presence of both non-portfolio differentiation and information/search frictions. Structural estimation of a novel search-over-differentiated-products model reveals that reasonable magnitudes of investor search costs can explain the considerable price dispersion in the sector, and consumers seem to value funds'' observable attributes such as fund age and the number of other funds in the same fund family in largely plausible ways. The results also suggest that the substantial increase in mutual fund market participation observed during our sample, and the corresponding purchase decisions of novice investors, drove the shift in assets toward more expensive funds. We also find evidence consistent with the presence of switching costs, as distinct from search costs. Using structural estimates of demand parameters and search costs, we investigate the possibility that there are too many sector funds from a social welfare standpoint. The results of this exercise indicate that restricting entry would yield nontrivial gains from reduced search costs and productivity gains from scale economies, but these may be counterbalanced by losses from increased market power and reduced product variety.
Download or read book Conflicts of Interest and Competition in the Mutual Fund Industry written by Ajay Khorana and published by . This book was released on 2011 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mutual fund investors generally desire high risk-adjusted performance at low cost, which is not necessarily the objective of fund families. Fund families generally want to maximize assets under management (i.e., their market share) and the resulting management fees. This paper examines how these conflicting objectives affect competition and investor behavior in the mutual fund industry for the universe of U.S. mutual fund families over the period 1979-1998. Over this period, industry assets increased by a factor of twenty, the number of active fund families tripled, and the average market share of a family declined by two thirds. We find that price competition is important in the industry. Families that charge lower fees than the competition gain market share, but only if these fees are above average to begin with. Low-cost families do not lose market share by charging higher fees. In addition, fees charged explicitly for marketing and distribution (12b-1 fees) have a positive impact on market share. We find no evidence that investors derive any benefit from 12b-1 fees. Product differentiation strategies are also effective in obtaining market share. Families that perform better, and start more funds relative to the competition (a measure of innovation) have a higher market share. Innovation is rewarded more if the new fund is more differentiated from existing offerings and is in a less crowded objective. Finally, market share within an investment objective is driven primarily by a family's policies within that objective, but there are important performance spillover effects from other funds in the family. Our findings are robust to various tests for endogeneity of the explanatory variables. Overall, this paper highlights a number of conflicts between fund families and investors.
Download or read book Mutual Fund Fees written by United States. General Accounting Office and published by . This book was released on 2000 with total page 134 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Mutual fund fees additional disclosure could encourage price competition report to congressional requesters written by and published by DIANE Publishing. This book was released on with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Swing Pricing and Fragility in Open end Mutual Funds written by Dunhong Jin and published by International Monetary Fund. This book was released on 2019-11-01 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: How to prevent runs on open-end mutual funds? In recent years, markets have observed an innovation that changed the way open-end funds are priced. Alternative pricing rules (known as swing pricing) adjust funds’ net asset values to pass on funds’ trading costs to transacting shareholders. Using unique data on investor transactions in U.K. corporate bond funds, we show that swing pricing eliminates the first-mover advantage arising from the traditional pricing rule and significantly reduces redemptions during stress periods. The positive impact of alternative pricing rules on fund flows reverses in calm periods when costs associated with higher tracking error dominate the pricing effect.
Download or read book Competition in the Mutual Fund Industry written by John C. Coates and published by . This book was released on 2007 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Since 1960 the mutual fund industry has grown from 160 funds and $18 billion in assets under management to over 8,000 funds with $10.4 trillion in assets. Yet critics, including Yale Chief Investment Officer David Swensen, Vanguard founder Jack Bogle, and New York Governor Eliot Spitzer, call for more fund regulation, claiming that competition has not protected investors from excessive fees. Starting in 2003, the number of class action suits against fund advisors increased sharply, and, consistent with critics' views, some courts have excluded or treated skeptically evidence of competition and comparable fees of other funds. Skepticism about fund competition dates to the 1960s, when the SEC accepted the view that market forces fail to constrain advisory fees, in part because fund boards rarely fire advisors. In this article, we show that economic theory, empirical evidence, and careful analysis of the laws and institutions that shape mutual funds refute this view. Fund critics overlook the most salient characteristic of a mutual fund, redeemable shares. While boards rarely fire advisors, fund investors may fire advisors at any time by redeeming shares and switching into other investments. Industry concentration is low, new entry is common, barriers to entry are low, and empirical studies -- including new evidence presented in this article -- show higher advisory fees significantly reduce fund market shares, and so constrain fees. Fund performance is consistent with competition exerting a strong disciplinary force on funds and fees. Our findings lead us to reject the critics' views in favor of the legal framework established by ʹ36(b) of the Investment Company Act and the lead case interpreting that law (the Gartenberg decision), while suggesting Gartenberg is best interpreted to allow the introduction of evidence regarding competition between funds"--Preface.
Download or read book The Economics of Mutual Fund Markets written by William J. Baumol and published by . This book was released on 1990 with total page 236 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Competition in the Mutual Fund Industry written by Coates, IV (John C.) and published by . This book was released on 2011 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since 1960 the mutual fund industry has grown from 160 funds and $18 billion in assets under management to over 8,000 funds with $10.4 trillion in assets. Yet critics - including Yale Chief Investment Officer David Swensen, Vanguard founder Jack Bogle, and New York Governor Eliot Spitzer - call for more fund regulation, claiming that competition has not protected investors from excessive fees. Starting in 2003, the number of class action suits against fund advisors increased sharply, and, consistent with critics' views, some courts have excluded or treated skeptically evidence of competition and comparable fees of other funds. Skepticism about fund competition dates to the 1960s, when the SEC accepted the view that market forces fail to constrain advisory fees, in part because fund boards rarely fire advisors. In this article, we show that economic theory, empirical evidence, and careful analysis of the laws and institutions that shape mutual funds refute this view. Fund critics overlook the most salient characteristic of a mutual fund: redeemable shares. While boards rarely fire advisors, fund investors may fire advisors at any time by redeeming shares and switching into other investments. Industry concentration is low, new entry is common, barriers to entry are low, and empirical studies - including new evidence presented in this article - show higher advisory fees significantly reduce fund market shares, and so constrain fees. Fund performance is consistent with competition exerting a strong disciplinary force on funds and fees. Our findings lead us to reject the critics' views in favor of the legal framework established by sect;36(b) of the Investment Company Act and the lead case interpreting that law (the Gartenberg decision), while suggesting Gartenberg is best interpreted to allow the introduction of evidence regarding competition between funds.
Download or read book Competitive Equity written by Peter J. Wallison and published by A E I Press. This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mutual funds are a key resource for Americans saving for retirement, college, and other long-term goals. With hundreds of fund families and thousands of individual funds crowding the marketplace, competition would hardly seem an issue. Yet funds are failing to compete effectively on price. This is a serious problem for savers, because small price differences can deeply erode investment results over time. This book argues that the problem is not too little regulation, but too much and of the wrong kind. The authors show how current policy leads to de facto rate regulation and propose a new collective investment vehicle.
Download or read book Mutual Fund Industry Practices and Their Effect on Individual Investors written by United States. Congress. House. Committee on Financial Services. Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises and published by . This book was released on 2003 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt: Distributed to some depository libraries in microfiche.
Download or read book Product Differentiation Search Cots and Competition in the Mutual Fund Industry written by Ali Hortaçsu and published by . This book was released on 2003 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt:
