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The total cost of investing in mutual funds

Giorgio Albareto (), Giuseppe Cappelletti (), Andrea Cardillo () and Luca Zucchelli ()
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Giuseppe Cappelletti: European Central Bank
Andrea Cardillo: Bank of Italy
Luca Zucchelli: Bank of Italy

No 391, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The total costs of investment in an open-end fund include those that are charged on the fund and those directly attributed to subscribers (subscription and redemption fees). Subscriptions of funds characterized by the presence of costs directly attributed to investors have increased significantly in recent years. The paper presents an estimate of the Total Shareholders Cost (TSC) made using the information provided by the investment management companies in the supervisory reports. The estimates obtained show that in the period 2006-2016 the TSC was on average 1.58 per cent of the total assets of funds (1.74 per cent at the end of 2016). Subtracting direct and indirect costs borne by investors, the return on open-end funds is reduced from 3.5 per cent on average to 2 per cent. Based on preliminary results, the presence of subscription and redemption fees reduces the elasticity of subscriptions and redemptions with respect to returns.

Keywords: mutual funds; Total Expense Ratio; Total Shareholders Cost (search for similar items in EconPapers)
JEL-codes: G11 G23 E60 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk and nep-mac
Date: 2017-09
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