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American Economic Review: Vol. 102 No. 1 (February 2012)

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

Article Citation

Anagol, Santosh, and Hugh Hoikwang Kim. 2012. "The Impact of Shrouded Fees: Evidence from a Natural Experiment in the Indian Mutual Funds Market." American Economic Review, 102(1): 576-93.

DOI: 10.1257/aer.102.1.576

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)

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Authors

Anagol, Santosh (U PA)
Kim, Hugh Hoikwang (U PA)

JEL Classifications

D14: Personal Finance
G23: Pension Funds; Other Private Financial Institutions; Institutional Investors
G28: Financial Institutions and Services: Government Policy and Regulation
O16: Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance


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