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The Impact of Shrouded Fees: Evidence from a Natural Experiment in the Indian Mutual Funds Market

Santosh Anagol and Hugh Hoikwang Kim

American Economic Review, 2012, vol. 102, issue 1, 576-93

Abstract: We study a natural experiment in the Indian mutual funds sector that created a 22-month period in which closed-end funds were allowed to charge an arguably shrouded fee, whereas open-end funds were forced to charge entry loads. Forty-five new closed-end funds were started during this period, collecting $7.6 billion US, whereas only two closed-end funds were started in the 66 months prior to this period, collecting $42 billion US, and no closed-end funds were started in the 20 months after this period. We estimate that investors lost and fund firms gained approximately $350 million US due to this shrouding. (JEL D14, G23, G28, O16)

Date: 2012
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Handle: RePEc:aea:aecrev:v:102:y:2012:i:1:p:576-93