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It Pays to Set the Menu: Mutual Fund Investment Options in 401(k) Plans

Veronika Pool, Clemens Sialm () and Irina Stefanescu
Additional contact information
Veronika Pool: Indiana University, Bloomington
Irina Stefanescu: Board of Governors of the Federal Reserve System

No 13-021, Discussion Papers from Stanford Institute for Economic Policy Research

Abstract: This paper investigates whether mutual fund families acting as trustees of 401(k) plans display favoritism toward their own funds. Using a hand-collected dataset on retirement investment options, we show that poorly-performing funds are less likely to be removed from and more likely to be added to a 401(k) menu if they are affiliated with the plan trustee. We find no evidence that plan participants undo this affiliation bias through their investment choices. Finally, the subsequent performance of poorly-performing affiliated funds indicates that these trustee decisions are not information driven and are costly to retirement savers.

Date: 2014-01
New Economics Papers: this item is included in nep-age and nep-sog
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http://www-siepr.stanford.edu/repec/sip/13-021.pdf (application/pdf)

Related works:
Journal Article: It Pays to Set the Menu: Mutual Fund Investment Options in 401(k) Plans (2016) Downloads
Working Paper: It Pays to Set the Menu: Mutual Fund Investment Options in 401(k) plans (2014) Downloads
Working Paper: It Pays to Set the Menu: Mutual Fund Investment Options in 401(k) Plans (2013) Downloads
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