The Mutual Fund Industry

Competition and Investor Welfare

R. Glenn Hubbard, Michael F. Koehn, Stanley I. Ornstein, Marc Van Audenrode, and Jimmy Royer

Columbia University Press

The Mutual Fund Industry

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Pub Date: April 2010

ISBN: 9780231151825

256 Pages

Format: Hardcover

List Price: $34.95£24.95

Pub Date: April 2010

ISBN: 9780231525329

256 Pages

Format: E-book

List Price: $33.99£25.00

The Mutual Fund Industry

Competition and Investor Welfare

R. Glenn Hubbard, Michael F. Koehn, Stanley I. Ornstein, Marc Van Audenrode, and Jimmy Royer

Columbia University Press

Mutual funds form the bedrock of retirement savings in the United States, and, considering their rapid growth, are sure to be more critical in the future. Because the size of fees paid by investors to mutual fund advisers can strongly affect the return on investment, these fees have become a contentious issue in Congress and the courts, with many arguing that investment advisers grow rich at the expense of investors.

This ground-breaking book not only conceptualizes a new economic model of the mutual fund industry, but also uses this model to test for price competition between investment advisers, evaluating the assertion that market forces fail to protect investors' returns from excessive fees. Highly experienced authors track the growth of the industry over the past twenty-five years and present arguments and evidence both for and against theories of adviser malfeasance. The authors review the regulatory history of mutual fund fees and summarize leading case decisions addressing excessive fees.

Revealing the extent to which the governance structure of mutual funds truly impacts fund performance, this book provides the best understanding of today's mutual fund industry and is a vital tool for investors, money managers, fund directors, securities lawyers, economists, and anyone concerned with the regulation of mutual funds.

The Mutual Fund Industry investigates the frequent claim that investment advisers set monopoly prices for their services to retail mutual funds. In scope and detail, it is an excellent economic analysis. This book should be of interest to public policymakers, securities lawyers, and economists.

Clement G. Krouse, University of California, Santa Barbara

The Mutual Fund Industry is extremely well written and clear, and the authors are the first to present solid empirical results to address price competition in the mutual fund industry. The outcomes of these empirical tests are striking and important not only for mutual fund investors but also for courts, government antitrust policy, and rating agencies.

Joop Huij, Erasmus University, Rotterdam

The Mutual Fund Industry is a very valuable contribution to the continuing and contentious debate over the competitiveness of the mutual funds industry. The authors make a strong case that this market is highly competitive and provide both analytical and empirical grounds for their conclusions.

William J. Baumol, Berkley Center for Entrepreneurial Studies

The Mutual Fund Industry is a choice collection that shouldn't be missed for anyone using their money wisely.

Midwest Book Review
List of Figures
List of Tables
Foreword
Preface
Introduction
1. Mutual Fund Industry Growth and Importance in Retirement Plans
2. Mutual Funds and Charges of Excessive Fees: The Historical Background
3. Mutual Fund Excessive Fees and the Courts
4. Price Competition and the Demand for Mutual Funds
5. Mutual Fund Industry Structure and Indicators of Price Competition
6. Mutual Fund Pricing, Excessive Fees, and Empirical Evidence
7. Mutual Funds' Organizational Form and Conflicts of Interest
8. What Have We Learned?
Appendix to Chapter Four
Appendix to Chapter Seven
Notes
Bibliography
Index

About the Author

R. Glenn Hubbard is dean of Columbia Business School and the Russell L. Carson Professor of Economics and Finance. He was chairman of the President's Council of Economic Advisers from 2001 to 2003 and has published more than one hundred articles on investing, banking, energy economics, and public policy. With William Duggan, he is the author of The Aid Trap: Hard Truths About Ending Poverty.

Michael F. Koehn is cofounder and affiliate of Analysis Group, Inc. and specializes in applied microeconomics and finance. His publications concern banking, finance, energy economics, and real estate. He is a coauthor of The Economics of Mutual Fund Markets: Competition Versus Regulation and has taught at the Graduate School of Management, University of California, Irvine.

Stanley I. Ornstein is vice president of Analysis Group, Inc. He specializes in applied microeconomics and industrial economics and their applications to issues of competition and regulation. His numerous publications tackle market structure and performance, advertising and competition, exclusive dealing and resale price maintenance, and competition in various industries.

Marc Van Audenrode is a managing principal of Analysis Group, Inc. and a specialist in labor economics, antitrust, econometrics, and public economics. His publications appear in numerous economic journals, and he is a frequent presenter at industry and academic conferences.

Jimmy Royer is a vice president of Analysis Group, Inc. and specializes in econometrics, antitrust, financial economics, and labor economics. He has taught at the Université Laval and the Université de Sherbrooke, and his research and publications cover such topics as limit entry pricing, investment valuation, wage flexibility, and unemployment compensation.