Mutual fund advisory fees: The cost of conflicts of interest
Despite its phenomenal marketing success, the mutual fund industry now finds aspects of its conduct under attack from various quarters. This article examines whether the chief product that shareholders buy when they invest in mutual funds - professional investment advice - is being systematically ov...
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Published in | The Journal of corporation law Vol. 26; no. 3; p. 609 |
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Main Authors | , |
Format | Journal Article |
Language | English |
Published |
Iowa City
University of Iowa, College of Law
01.04.2001
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Subjects | |
Online Access | Get full text |
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Summary: | Despite its phenomenal marketing success, the mutual fund industry now finds aspects of its conduct under attack from various quarters. This article examines whether the chief product that shareholders buy when they invest in mutual funds - professional investment advice - is being systematically overpriced by fund managers. The emphasis is on advisory fees imposed on equity mutual funds. How the industry's unique management structure accounts for the alleged lack of price competition in the delivery of management advice perceived by the industry's detractors is discussed. Questions relating to economies of scale in the fund industry are presented. Causes for the status quo are studied, including the industry's statutory scheme, the quality of the SEC's regulatory efforts, and the reception given fund critics by the courts. The article concludes with a set of proposals for changing the present competitive environment in which fund advisory fees are set, disclosed, and evaluated. |
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ISSN: | 0360-795X |