Fiche du document
1 octobre 2014
- handle: 10670/1.yxb3c6
- hal: hal-02313203
Mots-clés
fund fee management fees asymmetric information markup investor expectations fund underperformance principal-agent relationship mutual funds fund performance fund classificationSujets proches
Unit investment trusts Investment companies Open-end mutual funds Profit-sharing trusts Investment trusts Unit trusts UITsCiter ce document
Andreas Huesler et al., « Investors' expectations, management fees and the underperformance of mutual funds », HAL-SHS : droit et gestion, ID : 10670/1.yxb3c6
Métriques
Partage / Export
Résumé
Why do investors buy underperforming mutual funds? To address this issue, we develop a one-period principal-agent model with a representative investor and a fund manager in an asymmetric information framework. This model shows that the investor's perception of the fund plays a key role in the fund's fee-setting mechanism. Using a simple relation between fees and funds' performance, empirical evidence suggests that most US domestic equity mutual funds have added high markups during the period from July 2003 to March 2007. For these fees to be justified, we show that the investor would have expected the fund manager to deliver an overall annual net excess-return of around 1.5% above the S&P500 on a risk adjusted basis. In addition, our model offers a new classification of funds, based on their ability to provide benefits to investors' portfolios.