Do Investors Benefit from 12b-1 Fees?

Richard J. Dowen and Thomas Mann
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Richard J. Dowen: Northern Illinois University
Thomas Mann: Northern Illinois University

American Journal of Business, 2007, vol. 22, issue 1, pages 21-29

Abstract: Under rule 12b-1, mutual funds are allowed to charge a fee of up to 100 basis points per year to cover marketing and distribution costs. Under NASD rules, a fund may charge a 12b-1 fee of up to 25 basis points per year and still advertise itself as a no load fund. This fee is used to make the funds charging it more visible to the investing public. The question explored here is very simple; are the investors in no load funds well served by investing in those funds that charge this fee? It is shown here that the no load funds charging 12b-1 fees do not perform as well as the funds that do not charge the fee but that they experience greater cash inflows.

Keywords: 12b-1; mutual funds; investment; NASD (search for similar items in EconPapers)
JEL-codes: R00 Z0 (search for similar items in EconPapers)
Date: 2007

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Persistent link: http://EconPapers.repec.org/RePEc:maj:ancoec:v:22:y:2007:i:1:p:21-29

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