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Myths About Mutual Fund Fees: Economic Insights On Jones V. Harris, D. Bruce Johnsen
Myths About Mutual Fund Fees: Economic Insights On Jones V. Harris, D. Bruce Johnsen
D. Bruce Johnsen
Mutual funds stand ready at all times to sell and redeem common stock to the investing public for the net value of their assets under management. In the language of transaction cost economics, they are open-access common pools subject to virtually free investor entry and exit. The Investment Company Act (1940) requires mutual funds to be managed by an outside advisory firm pursuant to a written contract, which normally pays the adviser a small share of net asset value, say, one-half of one percent per year. Following 1970 amendments to the Investment Company Act imposing a fiduciary duty on advisers …