Mutual Fund Advisory Fees: From Gartenberg to Jones

Abstract

The paper surveys three important mutual fund advisory fee cases that defined the 36(b)-litigation landscape between Gartenberg v. Merrill Lynch and Jones v. Harris. It also provides a simple and clear example of economies of scale in the mutual fund advisory function and discusses how an equitable sharing of economies of scale with fund investors may be accomplished. Finally, the paper argues against the proposition the mutual fund advisory fees are subject to the forces of arm’s length bargaining.