Cost efficiencies and the selection of closed-end funds
DOI:
https://doi.org/10.61190/fsr.v18i2.4939Keywords:
Expense ratios, Economies of scale, Cost-efficiencies, Closed-end fundsAbstract
Over the last decade, the amount of assets under management in closed-end funds (CEFs) has almost doubled whereas the number of funds has increased by only about 26%. For investors who use CEFs in their portfolios, it is important to understand whether this growth provides benefits through the existence of economies of scale. To aid individual investor in fund selection, this study provides an insight into the determinants of cost efficiencies in the CEF industry for the period 1995 to 2005. Empirical results show that cost increases in the United States CEF industry have been less than proportionate to increases in assets, which points to economies of scale for the industry. Furthermore, the average cost elasticity varies with fund size and investment objective.
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