RFS Advance Access published online on April 19, 2008
Review of Financial Studies, doi:10.1093/rfs/hhn042
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Mutual Fund Fees Around the World
Citigroup Global Markets Inc. and Georgia Institute of Technology
London Business School, CEPR and ECGI
Harvard Business School and NBER
Address correspondence to H. Servaes, London Business School, CEPR, and ECGI, Sussex Place, Regent's Park, London NW1 4SA, UK; telephone: +44-20-7000-8268; e-mail: hservaes{at}london.edu.
JEL Classification: G2, L11
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Abstract |
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Using a new database, we study fees charged by 46,580 mutual fund classes offered for sale in 18 countries, which account for about 86% of the world fund industry in 2002. We examine management fees, total expense ratios, and total shareholder costs (including load charges). Fees vary substantially across funds and from country to country. To explain these differences, we consider fund, sponsor, and national characteristics. Fees differ by investment objectives: larger funds and fund complexes charge lower fees; fees are higher for funds distributed in more countries and funds domiciled in certain offshore locations (especially when selling into countries levying higher taxes). Substantial cross-country differences persist even after controlling for these variables. These remaining differences can be explained by a variety of factors, the most robust of which is that fund fees are lower in countries with stronger investor protection.
We would like to thank Tuugi Chuluun, Elizabeth Darst, Arik Motskin, Debbie Strumsky, Lei Wedge, and Stefano Rossi for valuable research assistance and an anonymous referee, Francesco Bova, Peter Bowen (Fidelity Canada), Marc Buffenoir (Morningstar), Sally Buxton (Cadogan Financial), John Campea (Morningstar Canada), Kurt Cerulli (Cerulli Associates), Elizabeth Corley (Merrill Lynch Investment Managers), Joanne De Laurentiis (The Investment Funds Institute of Candada), Neil Fatherly (KPMG), Sylvester Flood (Morningstar), Vito Gala, Michele Gambera (Morningstar), Javier Gil-Bazo, Francisco Gomes, Dan Hallett, Ken Kivenko, Rudy Luukko (Morningstar Canada), Diana Mackay (FERI Fund Market Information), Wolfgang Mansfeld (Union Asset Management and FEFSI), Ed Moisson (Lipper Fitzrovia), Paul Moulton (Lipper Fitzrovia), Ben Phillips (Putnam Lovell NBF), Matt Spiegel, Mark St. Giles (Cadogan Financial), Paolo Volpin, Rodney Williams (FERI Fund Market Information), and seminar participants at the Autorité des Marchés Financiers, Boston College, the C.D. Howe Institute, the European Financial Management Association, Georgia State, INSEAD, London Business School, Norwegian School of Management, Southern Methodist University, University of Toronto, Yale University, and York University for their useful comments, criticism, and suggestions. We are grateful to Morningstar, Financial Research Corporation and Lipper Fitzrovia who provided data for this project and to Steve Kaplan for his help in getting us access to some of these data. Financial support for this project was provided by the Division of Research of the Harvard Business School, the Research and Materials Development Fund of London Business School, Georgia Tech. and Inquire Europe. Any opinions expressed are those of the authors and not of Citigroup Global Markets Inc. or the organizations that supported or provided information for this study.