Developing Better Fee Structures for Mutual Funds

Ronald T. Wilcox

Volume 3, Number 2, Second Quarter 2005

This paper presents a management decision model for setting mutual fund fees. The model pairs information obtained from a conjoint analysis, designed to uncover investors’ preferences for different fee structures, with information on the expected revenue generated from various fee structures to suggest a set of “efficient” fees to mutual fund managers. Companies that market mutual funds can use this model to refine the fees they impose. We demonstrate our modeling approach using data collected from mutual fund investors. Finally, we show how this same data, and the conjoint analysis methodology, can be used to uncover price discrimination opportunities in this marketplace.