Fund managers are paid a fixed management fee in proportion to their assets under management. This means to maximize revenue, managers hoard assets. Whilst this results in increased revenue for the manager often, due to diseconomies of scale, it results in lower returns for the investor. Here we...

The distribution strategies of mutual funds directly or indirectly affect both their growth and their revenues. The extent of resources dedicated by a fund to its distribution channel(s) is therefore an important strategic decision. For a sample of US diversified equity mutual funds in the...

We examine the dynamics of assets under management (AUM) and management fees at the portfolio manager level in the closed-end fund industry. We find that managers capitalize on good past performance and favorable investor perceptions about future performance, as reflected in fund premiums,...

We show that risk-sharing considerations rationalize symmetric benchmark-adjusted ("fulcrum") fees in the compensation of informed active fund management. By tying fees symmetrically to the appropriate benchmark, investors can tilt a fund portfolio toward their optimal risk exposure and realize...

Active fee is the ratio between the excess cost of active management over the index alternative and the fund's activity level. We suggest a simple model that explains active capital allocations in the presence of time-varying active fee. We show that investors respond in accordance with the...

The active mutual fund equilibrium model developed by Berk and Green (2004) predicts that fees should not matter for investors’ mutual fund choices. We examine how fees influence demand for active mutual funds by analyzing time variation in funds’ fees. Since investors should not pay "alpha...