Mutual Fund Distribution Fees

An Empirical Analysis of the Impact of Deregulation

Authors

  • Don M. Chance Virginia Polytechnic Institute and State University
  • Stephen P Ferris Virginia Polytechnic Institute and State University

DOI:

https://doi.org/10.1016/1057-0810(91)90045-Z

Abstract

The Securities and Exchange Commission’s Rule 12b-1 ended a 40-year prohibition on the payment of distribution fees by mutual funds. The fees have the potential to create conflicts between fund mangers and shareholders. This study examines the characteristics of funds implementing the plans, and assesses costs and benefits. Findings reveal that there is a growing tendency of funds, particularly load funds, to adopt the plans. The costs have begun to increase dramatically in recent years though some load funds with plans have begun reducing their loads. However, 12b-1 plans do not seem to contribute to the expense ratios of funds oriented toward capital gains. The plans offer the intangible benefit of spreading load charges across time, thus increasing a fund’s attractiveness to a broader range of investors. Journal ofFinancial Services Research, Vol. 5, No. 1 (March 1991), pp. 25-42. (Reprinted with permission of Kluwer Academic Publishers.)

Published

1991-12-30

How to Cite

Chance , D. M., & Ferris , S. P. (1991). Mutual Fund Distribution Fees: An Empirical Analysis of the Impact of Deregulation. Financial Services Review, 1(2), 182. https://doi.org/10.1016/1057-0810(91)90045-Z

Issue

Vol. 1 No. 2 (1991): Financial Services Review

Section

Abstracts of Articles on Individual Financial Management

License

Copyright (c) 1991 JAI Press Inc.

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