The relationship between mutual fund fees and expenses and their effects on performance

Abstract

Fees charged by mutual funds include front-end load charges, deferred sales charges that decrease over time, redemption fees that are imposed whenever shares are sold, and 12b-1 fees. Fees may be justified if they allow the fund to lower other costs or improve performance. In this paper, we find that, on average, 12b-1 fees, deferred sales charges, and redemption fees increase expenses whereas funds with front-end loads generally have lower expenses. We also find that funds with 12b-1 fees and redemption fees, on average, earn higher risk adjusted returns but funds with front-end load charges earn lower risk adjusted returns.

Costs associated with mutual funds in Spain

“…Funds with greater cash positions seem to incur in lower management costs, which in turn reduces the fee applied. This result coincides with that found in the North American studies (Dellva and Olson, 1998;Luo, 2002), which include this variable, while the cash position is not significant in .…”

“…Subsequent studies by Tufano and Sevick (1997) and substantially extend the range of factors affecting the expense ratio. The study by Dellva and Olson (1998) focuses on the effect of various fees on the total expenses. More recent studies of particular relevance in this sense are the studies by Berkowitz and Kotowitz (2002), Luo (2002), and Lesseig et al (2002), which examine the determinants of management fees and administration fees separately; examines on management fees and Cullinan and Bline (2005) examine on custodial fees.…”

Determinants of pension plan fees in Spain

“…Also, Sharpe (1966), Treynor (1966), Jensen (1968Jensen ( , 1969 and Dellva and Olson (1998) point out that active management net of management fees and other costs does not beat passive management. This result is consistent with the findings of Ferris and Chance (1987), Trzcinka and Zweig (1990), Chance and Ferris (1991) and McLeod and Malhotra (1994), who argue that 12b-1 fees should be abolished.…”

Asset Liquidity and Mutual Fund Management Fees: Evidence from Closed-End Mutual Funds

“…Most of the prior studies of mutual funds fees (e.g. Ferris and Chance 1987, Chance and Ferris 1991, Malhotra and McLeod 1997, and Dellva and Olson 1998) only look at the aggregate level of fees by using the expense ratio in their models. Other studies (Christoffersen 2001, Lesseig et al 2002, Deli 2002, and Golec 2003 considered management fees separately.…”