The determinants of mutual fund fees: International evidence

Abstract

The equity fund industry has grown rapidly over the past decades. The fees are one of the factors that remarkably affect the flow of funds in this industry. This paper investigates the key determinants of active funds’ total ex- pense ratios (TERs) across 32 countries between 2002 and 2018. The results indicate that larger funds and man- agement companies charge lower fees, while international funds have higher TERs. But, the higher the mutual fund industry’s concentration is the lower the active funds’ fees. My outcomes also reveal that funds past perfor- mances negatively impact the TERs charged by active equity funds and less active funds have higher fees. These results may suggest that investors have heterogeneous preferences for services or even the existence of investors with distinct performance sensitivities.