Total Expense Ratio Research Articles

Can mutual fund characteristics predict future performance? Evidence from Portugal

PurposeThis paper aims to investigate not only the performance of Portuguese mutual funds investing in domestic and international equities but also which fund characteristics, such as age, size, family size, expense ratios and flows, influence future performance.Design/methodology/approachFund performance is evaluated over the 2005–2022 period by a robust six-factor model, while the impact of fund characteristics on performance is assessed by a set of fixed-effects panel data regressions with two-way cluster-robust standard errors.FindingsThe results show that, while funds investing in domestic equities predominantly exhibit neutral performance, most international equity funds have significantly negative alphas. The authors document a negative and statistically significant relationship between fund age and performance for all fund categories. Total expense ratios have an inverse relationship with domestic equity fund performance but do not impact the performance of international equity funds significantly. Though fund flows have a neutral effect on performance across the overall period, they are important determinants of both domestic and international funds’ performance in more recent years.Originality/valueThe authors contribute to the literature by carrying out a comprehensive analysis, based on recent and robust methodologies, of the impact of mutual fund characteristics on the future performance of Portuguese equity funds. The research findings serve as a premise for advising investors on how to choose the top-performing funds.

Analiza prihoda i rashoda tokom pandemije COVID-19 - slučaj preduzeća sektora I - usluge smeštaja i ishrane beogradske berze

The operations of companies in the field of tourism and catering have changed to a significant extent with the emergence of the COVID-19 pandemic. The aim of the work is to determine whether there have been changes in the income and expenses of hospitality companies in the Republic of Serbia with the onset of the COVID-19 pandemic. The research in the paper was carried out on the example of 15 companies listed on the Belgrade Stock Exchange within Sector I-Accommodation and Food Services, where their income statements for 2019 and 2020 were used as a data source. For research purposes, horizontal analysis and ratio analysis were used. In the largest number of observed hospitality companies in 2020, a decrease in income and expenses was recorded compared to 2019. Also, it was determined that in the largest number of observed companies, there was an increase in the ratio of total expenses and total income during the observed period. The results of the work can be of importance primarily to the management and owners of catering companies, in order to see the impact of the COVID-19 pandemic on financial performance, but they can also be useful to investors when making decisions about investing their funds, i.e. to economic policy makers when defining measures to overcome the consequences of the crisis.

Investment Decision Support Based on Interval Type-2 Fuzzy Expert System

The decision-making process on investing in financial markets is a very complex and difficult task, mainly due to the chaotic behavior and high uncertainty in the development of the prices of investment instruments. For this reason, financial markets are increasingly using means of artificial intelligence, namely fuzzy logic, which is able to capture the nonlinear behavior.Fuzzy logic provides a way to draw definitive conclusions from vague, ambiguous, or inaccurate information.However, there are some drawbacks associated with type-1 fuzzy logic, so the type-2 fuzzy logic comes forward, which can work with greater uncertainty. Type-2 fuzzy logic works with a new third dimension fuzzy set that provides additional degrees of freedom and allows to model and process numerical and linguistic uncertainties directly. The paper applies type-2 fuzzy logic to the stock market with the aim to create a simple and understandable model for deciding on investing in investment instruments, which is important for investors in this area. The proposed type-2 fuzzy model uses return, risk, dividend and total expense ratio of ETF as input variables. The created system is able to generate aggregated models from a certain number of language rules, which allows the investor to understand the created financial model. Using type-2 fuzzy logic can lead to more realistic and accurate results than type-1 fuzzy logic.

ASSESSING SOCIO-ECONOMIC CONDITIONS OF GINGER PRODUCERS IN WESTERN RUKUM DISTRICT OF NEPAL

The study was conducted in two wards (Triveni 6 and Triveni 7) of Triveni municipality of Western Rukum district of Nepal to know the socio-economic condition of the ginger producers. The data were collected from 30 farmers of each ward by interviewing the respondents. In both wards, the majority of the respondents were male and educated up to the primary level. The majority of the respondents were Janajati (43.28%) and Chhetri (43.32%) in Triveni 6 and Triveni 7 respectively. In both wards, the majority of the houses were mud thatched. In Triveni 6, 46.65% and Triveni 7, 51.73% of respondents belong to the age group of 36-50. The total expense, total revenue, net profit and benefit cost ratio per ropani were more in Triveni 6 than Triveni 7. Lack of agriculture loan was ranked as the first production problem with a 1.15 index value while the variable market price was ranked as the first marketing problem with a 0.79 index value. Among various suggestions, increment in agriculture loan availability was ranked as first for solving production problems with a 0.80 index value while making fixed market price was ranked as first for solving marketing problems with a 0.82 index value.

Every Cloud has a Silver Lining: On the Relation between Bank-Affiliated Asset Manager Bias and Mutual Fund Fees

Considering the institutional factors of the German mutual fund market, we analyze equity fund holdings of German retail clients who received financial advice between 2005 and 2014 to investigate whether those investors overweight the bank-affiliated asset manager and if so, whether this bank-affiliated asset manager bias leads to higher fees, i. e. Total Expense Ratios. Our analysis clearly indicates the presence of large bank-affiliated asset management biases for clients of all different banking sectors. Thus, German retail clients follow the biased financial advice they receive from their bank. Surprisingly, this bank-affiliated asset manager bias significantly reduces portfolio costs measured via mutual fund fees. Therefore, German banks disproportionately promote products of bank-affiliated asset managers but this biased advice does not lead to higher portfolio costs.

The Unbundling of Mutual Funds’ Trading and Research Commissions: Have Investors Benefited?

One prominent aspect of the MiFID II regulation that became effective in Europe in 2018 is the unbundling of research and execution costs. We exploit the early adoption of this rule in Sweden already in 2016 to provide early evidence on the implications for fund investors. Using a diff-in-diff framework and mostly hand-collected data on bundled and unbundled commissions, we find basically no impact of the regulation on fund investors: neither total expense ratios nor fund performance changed in response to the unbundling. We also fail to document any information gains for investors’ fund selection process from the increased transparency of observing execution and research costs separately. Overall, we are skeptical that the unbundling of commissions has had any positive impact on fund investors.

Return Differences between DAX ETFs and the Benchmark DAX

For the DAX index market, this paper analyses the development of return differences between exchange traded funds (ETFs) and the DAX index from the perspective of long-term investors. The newly introduced methodology provides the opportunity to continuously identify long-term costs of passively managed products independent from the information of annual financial statements. This enables to test for product-specific return differences and to identify relevant cost drivers such as index returns and market makers. Results reveal that on average, DAX ETFs costs considerably exceed total expense ratios. Product-specific return differences are significant, however, differences tend to converge over time. For all ETFs, deviations are significantly influenced by index returns. Product characteristics deliver valuable arguments to explain these findings. Also market makers significantly contribute to return differences.

The Tracking Efficiency of Physical and Synthetic Equity Index ETFs

This article evaluates the tracking efficiency of physical and synthetic Exchange Traded Funds (ETFs). Theoretically, synthetic ETFs should provide greater tracking efficiency. We study this using ETFs domiciled in Europe tracking the European, United States and Emerging Markets. We calculate the tracking error differences and use univariate analysis across both replication and regional strategies. Our contribution is in identifying the variables that influence ETF tracking efficiency. We find the total expense ratio remains the pre-eminent explanatory variable, but the type of replication strategy is a significant secondary factor. We observe that the counterparty risk in synthetic strategies is not rewarded relative to physical replication strategies, but the synthetic ETFs increase returns of tangency portfolios compared to physical ETFs when analyzed using mean-variance spanning techniques. This suggests investment in synthetic strategies is suited to risk tolerant investors and investment in physical strategies is more suited for risk averse investors. TOPICS:Exchange-traded funds and applications, analysis of individual factors/risk premia, VAR and use of alternative risk measures of trading risk, risk management, interest-rate and currency swaps Key Findings • The type of replication strategy employed by an ETF is a significant secondary factor in its tracking efficiency. • Synthetic ETFs’ replication increases returns of tangency portfolios compared to physical ETFs when analyzed using mean-variance spanning techniques. • Investment in synthetic strategies is suited to risk tolerant investors, while investment in physical strategies is more suited for risk averse investors.

Active versus Index Equity Investing - Early Evidence from India

This paper examines the relative performance of actively managed equity mutual funds against liquid, low-cost index-tracking exchange-traded-funds in India and investigates the merit of investing in index trackers. This is an important discussion as a majority of flows to equity schemes in the Indian fund industry currently go to share classes of actively managed funds with the highest total expense ratios. This high expense ratio raises the question of whether an investor would be better off investing in a low-cost index tracker. To deal with the active-vs-index decision for an investor, we build a simple yet robust framework using Information Ratio and R-square and use this framework to examine the performance of key equity scheme categories against two index trackers in India. The paper preliminarily affirms that low-cost index ETFs in India are credible alternatives to actively managed funds both in terms of performance and cost to the investor. The results provide preliminary evidence of, broadly defined, closet indexing in the Indian active fund management industry and raises issues of reasonableness and relevance of choice of benchmarks by active fund managers specifically in fund categories like focused schemes.

Do European renewable energy mutual funds foster the transition to a low-carbon economy?

Economic growth and development around the world are leading to increasing worldwide demand for energy, whose production still mainly comes from fossil fuels generating large amounts of greenhouse gas emissions, which contribute to global warming and climate change. To mitigate climate change, the European Union implemented an energy policy strategy that encourages firms to implement sustainable energy systems. This could generate investment opportunities in energy efficiency and renewable energy projects around the world for European mutual funds. Therefore, the main aim of this paper is to analyze the financial performance of energy and renewable energy mutual funds using conditional and unconditional models. To this end, we have a sample of 4496 mutual funds commercialized in Europe in the period 2007–2018. Our results indicate that renewable energy mutual funds perform similarly to the market using conditional models. However, they underperform their conventional peers using a specialized market benchmark, reaching similar performance to black energy funds. While the total expense ratio negatively affects renewable energy financial performance, other fund characteristics, such as size or Socially Responsible Investing (SRI) certification, do not affect it.

The Total Expense Ratio: The Reality of Distribution Fees—“Behind the Mutual Fund Curtain”

This study uses the portion of a new Total Expense Ratio construct that discloses the reality of adviser/distributor payments of hidden distribution fees to sales brokers “behind the mutual fund curtain.” Distribution fees consist of dealer (broker) concessions, account servicing (12b-1 fees), types of revenue sharing payments, and soft-dollar trades. Distribution fees are one of four categories in the Total Expense Ratio, the others being (1) management fees, (2) “other” expenses, and (3) transaction costs. Adoption of the complete Total Expense Ratio with normative transparency of disclosure followed by prohibition of 12b-1 fees, revenue sharing payments, and soft-dollar trading requires strong action by fund independent directors, the fund industry, and most importantly, by Congress and the SEC. Only a few fund advisers are likely to join in this effort to change their very profitable status quo. However, as the article maintains, fund shareholders deserve to receive their “fiduciary protections” under the law and the TER may be useful in this regard.

Analiza wpływu wybranych czynników na popyt na usługę zarządzania funduszem inwestycyjnym

Analysis of the impact of selected determinants on the demand for mutual fund management servicesThe authors try to identify the main factors impacting the value of inflows to mutual funds in Poland. The inflows to mutual funds are compared to the following data: costs total expense ratios, investment performance in the current and previous year, and fund size. The data was collected from 451 financial statements of Polish mutual funds, for the years 2012–2016. The funds belong to three categories: bond, equity, small, and mid cap equity. The findings suggest that the connection between the funds fees — the price — and inflows to funds is relatively weak. Investment performance in the same year is the only factor that shows significant correlation with mutual fund flows.

Paying the High Price of Active Management: A New Look at Unit Trust Fees

This study attempts to allocate the fund management expenses of actively managed South African general equity unit trusts between active and passive management portions, thereby calculating the implicit cost of active management. The active expense ratio of a unit trust can be calculated by using the published total expense ratio (TER) of the unit trust, its correlation relative to its benchmark and the expense ratio of a comparable exchange traded fund (ETF) tracking the benchmark of the unit trust.This study focuses on actively managed South African equity unit trusts available to the retail investor for the period March 2007 to February 2015. The active expense ratios of these unit trusts were calculated on the basis of a three-, five- and eight-year analysis period.It was found that the mean active expense ratios of the South African unit trust sample amounted to 4,14%, 4,29% and 4,25% respectively in the case of the three-, five- and eight-year periods. The comparable mean reported TERs amounted to 1,60%, 1,61% and 1,61% respectively. Thus the mean active expense ratio is more than 150% higher than the comparable mean reported TER in each period.A similar study was conducted by Miller (2010), investigating the active expense ratios of actively managed large cap American unit trusts. He found that the mean active expense ratio was 6.44%, compared with a mean TER of 1.20%. However, due to a higher degree of active management being employed by South African managers, the active expense ratios are lower than those of the American counterparts.

The Only Fund in Town? Geographic Segmentation in the US Mutual Fund Industry

AbstractWe find that mutual funds located in regions with more competing funds charge lower management fees, but higher fees related to sales and distribution (12b‐1 fees), sales loads, and other nonmanagement fee expenses. There is some evidence that funds in more competitive regions have higher total expense ratios than similar funds in less competitive regions. Our results indicate that while increased competition drives down fund profits, it creates a negative externality by way of increased sales expenses. Overall, our results suggest the mutual fund industry is characterized by monopolistic competition determined at the local level.

Expensive and cheap funds – Polish stock mutual fund fees in 2017

Mutual fund fees are extraordinarily high in Poland – almost three times higher than in Western Europe and almost five times higher than in the United States. In fact is that from among 183 Polish open-ended stock mutual funds as many as 81 impose a management fee of 4%, which is the highest value in the sample. The question arises whether it is really worth to invest in funds from the more expensive group. Comparing funds charging the highest fees (4%) with the cheaper ones it seems that there is no statistically significant difference between rate of return, risk and efficiency. However, more expensive funds have on average higher costs, are three years older and have almost 70% bigger assets. This may suggest that a well-established market position – not performance – is the trigger for raising their fees. Interestingly, funds with a relatively high minimal initial contribution level (5,000 PLN) have significantly lower management fees with similar costs, total assets value and performance results. Further analysis has also indicated that the costs level (Total Expense Ratio) is higher for older funds, while it is not related to funds’ size.

Some Clarity on Mutual Fund Fees

Analyses of mutual fund fees have differed over whether fees are responsive to the forces of competition. Some academic and legal scholars argue that because mutual fund markets possess some of the indicia of competitive markets, fees must approximate marginal costs and thus cannot be excessive. Others argue that structural anomalies in mutual fund governance allow fund managers to overcharge mutual fund investors. This paper resolves the disagreement. It presents compelling evidence that investment management fees, a major component of total fees are immune to the forces of competition. This is accomplished with a combination of financial and legal analysis. We survey the universe of mutual fund assets and fees over time. We find that between 2005 and 2015 total expense ratios declined; principally because investors allocated an increased proportion of their funds to passively managed open end and exchange traded funds. However, over the same period assets on actively managed open end funds more than doubled while investment management fees, also known as advisory fees increased slightly. This outcome is inexplicable in economic terms but consistent with the legal environment the investment management industry operates in. Indeed, we show how the industry has shaped the environment. The genesis of the fee anomaly is the 1970 Amendment to the Investment Company Act of 1940. Studies by the Wharton School and the SEC showed investment management fees higher than fees subject to competitive forces. The Commission recommended that advisory fees should be reasonable. and enforceable in court. The investment management industry pushed back against this recommendation and successfully killed the Commission's proposal, following which Congress, the Commission, and the industry crafted a compromise. that made investment advisers fiduciaries with respect to fees and gave investors private cause of action. As evidenced by the inelasticity of management fees, the purported solution to the problem was ineffective. We show how Congress signaled its endorsement of the status quo and how the courts have interpreted the Congressional signal: cases up to and including the recent Supreme Court decision in Jones v. Harris have been uniformly negative for plaintiffs. No plaintiff has ever received an award under the 36(b) statute. As a result of the industry-favoring political and judicial environment, investors in actively managed mutual funds are overcharged by about $30 billion per year. The investment management firms who sponsor and brand actively managed mutual funds earn monopoly profits and excess returns for their owners.

Nonprofit Arts Organizations: Debt Ratio Does Not Influence Donations—Interest Expense Ratio Does

Due to increased competition for scarce resources, scholars and practitioners have been devoting more attention to identifying the factors that drive private contributions to nonprofit organizations in recent years. This study aims to investigate whether capital structure decisions made by nonprofit managers have an impact on future contributions from individual donors. More specifically, it asks whether debt is associated with a reduction in future financial support. This study relies on data derived from the DataArts Cultural Data Profile to answer this question. It utilizes a log-log model where the dependent variable is defined as total private contributions in the current period. Results indicate that an increase in the interest expense to total expense ratio is associated with a decrease in future contributions. A nonprofit’s debt to assets ratio, however, does not have a statistically significant impact on future contributions.

Income And Expense Analysis Of Retail Trade Sector Companies Traded On Borsa Istanbul

<p>Retail trade sector is growing rapidly and shows significant improvements in the “World Trade”. This charming sector is expanding and developing in Turkey appropriate to the developments in the world. In particular, population growth, the spread of the use of a credit card, the developments in Turkey’s economy and such other reasons, this sector has made a quite development in recent years.</p><p> </p>There are a total of eight companies operating in the retail trade sector in Borsa (Stock Market) Istanbul. Operating expenses such as; research and development expenses, marketing, sales and distribution expenses, general administrative expenses are very important for the determination of profitability of these companies. In this study answers to the following questions are to be searched; what is the share of operating expenses in this sector? Is there a relationship between the profitability with operating expenses? What is the ratio of total expenses in operating expense? What is the rate and volume amount of domestic market sales and export to foreign markets? This eight retail trade company operating in Bourse Istanbul will be reviewed by analyzing their income tables statistically.

Impact of corporate characteristics on human resource disclosures

Purpose Human resource (HR) disclosures are voluntary in nature in most countries including India. The voluntary nature of HR disclosures results in discrepancy in the HR disclosure practices across companies and industries. The purpose of this paper is to examine the extent of HR disclosures in annual reports of Indian listed companies and to identify their determinants in a three stage analysis. Design/methodology/approach In the first stage a 16 item human resource disclosure index (HRDI) has been constructed for the set of CNX 200 companies listed on National Stock Exchange. Thereafter the effect of various independent variables on HRDI is analysed descriptively. Finally in the third stage HRDI has been regressed against the independent variables using regression analysis technique to identify key determinants of HRDI. Findings The research reveals that there is high variation among sample companies as regard HRDI. The results of descriptive analysis, correlation analysis and multivariate regression analysis establish that government’s participation in ownership and market capitalisation has positive significant effect on HRDI at 1 per cent, presence of separate HR directors committee, presence of more independent directors on board at 5 per cent and cross-list America and profit after tax at 10 per cent level. Implicitly HRDI is positively affected by size of company as measured by market capitalisation. Though contrary to expectations, other variables leverage, number of employees, assets, ownership concentration, type of auditor, age, complexity of business structure, employee expense to total operating expense ratio, industry affiliation, foreign investment and proportion of non-executive directors on board are found to have moderate though insignificant influence on HRDI. Research limitations/implications Cross-sectional design, dependence on annual reports as a primary document for disclosure and subjectivity in HRDI construction are the main limitations of the research. A longitudinal study may be carried to study the pattern of HR disclosures in future. Weighted ranking of different items of disclosures may be studied to improve the understanding of extent of disclosures. Practical implications The HRDI as constructed in the research may be used as a benchmark by companies to improve their HR disclosures. It can also be used by accounting bodies and company regulators while deciding about standards regarding HR disclosures. Investors can also use HR disclosures made by a company as a basis to understand its financial standing and future potentials. Originality/value The study adds to the existing literature by developing 16 item HRDI to measure the extent of disclosures by listed companies in India and thereafter by including some new propositions in the determinants of HRDI have never been tested in the existing studies. These propositions are government’s participation in ownership, separate HR committee of directors, board composition and foreign activity. These propositions have been empirically validated in this research except for foreign activity.

Mutual Funds Apart from the Crowd

We construct measures of mutual fund uniqueness using cluster analysis of fund returns. We find funds that are more unique have higher total expense ratios, mainly due to their higher management fees. As the fund uniqueness increases, the gap in net performance widens between funds with above-median past performance and those with below- or at-median past performance. Fund uniqueness significantly reduces the sensitivity of fund flows to past performance, and increases performance persistence, especially when funds perform poorly. Since unique funds are more difficult to evaluate, these results support the prediction that higher search costs in the asset management markets lead to higher fees and larger outperformance by informed managers. They also suggest that higher costs of performance evaluation and the lack of close substitutes reduce the sensitivity of fund flows to performance and increase the convexity in the flow-performance relation, which may in turn increase performance persistence, especially the persistence of poor performance.