The Economics of Mutual Fund Markets: Competition Versus Regulation

1. Front Matter

   Pages i-2

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2. Introduction

   • William J. Baumol, Stephen M. Goldfeld, Lilli A. Gordon, Michael F. Koehn

   Pages 3-6

3. History of the Development of the Mutual Fund Industry

   • William J. Baumol, Stephen M. Goldfeld, Lilli A. Gordon, Michael F. Koehn

   Pages 7-46

4. Regulation of the Mutual Fund Industry

   • William J. Baumol, Stephen M. Goldfeld, Lilli A. Gordon, Michael F. Koehn

   Pages 47-65

5. Litigation under the 1940 Act and the 1970 Amendments

   • William J. Baumol, Stephen M. Goldfeld, Lilli A. Gordon, Michael F. Koehn

   Pages 67-101

6. Analysis of the Adviser-Shareholder Relationship in the Mutual Fund Industry

   • William J. Baumol, Stephen M. Goldfeld, Lilli A. Gordon, Michael F. Koehn

   Pages 103-109

7. A Study of Current Market Conditions in the Mutual Fund Industry

   • William J. Baumol, Stephen M. Goldfeld, Lilli A. Gordon, Michael F. Koehn

   Pages 111-137

8. The Demand for Money Market Mutual Funds

   • William J. Baumol, Stephen M. Goldfeld, Lilli A. Gordon, Michael F. Koehn

   Pages 139-164

9. A Cost Study of Mutual Fund Complexes

   • William J. Baumol, Stephen M. Goldfeld, Lilli A. Gordon, Michael F. Koehn

   Pages 165-212

10. Toward Rational Policy on Regulation of Mutual Funds

    • William J. Baumol, Stephen M. Goldfeld, Lilli A. Gordon, Michael F. Koehn

    Pages 213-223

11. Back Matter

    Pages 225-242

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The original impetus for this research was provided several years ago by a request to assist Counsel for Fidelity Management and Research Corporation in analyzing the mutual fund industry, with particular emphasis on money market mutual funds. We were asked to focus our efforts on the mechanism by which the advisory fees of mutual funds are determined. This request arose out of litigation that challenged the level of advisory fees charged to the shareholders of the Fidelity Cash Reserve Fund. Subsequently, we were asked to provide similar assistance to Counsel for T. Rowe Price Associates regarding the fees charged to shareholders of their Prime Reserve Fund. 1940, advisers of Under the Investment Company Act of mutual funds have a fiduciary duty with respect to the level of fees they may charge a fund's shareholders. Since the passage of the Investment Company Act, there have been numerous lawsuits brought by shareholders alleging that advisory fees were excessive. In these lawsuits, the courts have failed to provide a set of standards for determining when such fees are excessive. Instead, they have relied on arbitrary and frequently ill-defined criteria for jUdging the reasonableness of fees. This failure to apply economic-based tests for evaluating the fee structure of mutual funds provided the motivation for the present book, which undertakes a comprehensive analysis of the economics of the mutual fund industry.

• Funds
• competition
• econometrics
• investment
• regulation

• New York University, USA

  William J. Baumol

• Princeton University, USA

  William J. Baumol, Stephen M. Goldfeld

• Analysis Group, Inc., USA

  Lilli A. Gordon, Michael F. Koehn

• University of California, Irvine, USA

  Michael F. Koehn

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