The impact of shrouded fees: Evidence from a natural experiment in the Indian mutual funds market

Authors: Anagol, Santosh, and Hugh Hoikwang Kim
Publication: American Economic Review 102, no. 1 (2012): 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. 45 new closed-end funds were started during this period collecting 7.6 billion $U.S, whereas only two closed-end funds were started in the 66 months prior to this period collecting .42 billion $U.S., and no closed-end funds were started in the 20 months after this period. We estimate that investors lost and fund rms gained approximately 500 million $U.S. due to this shrouding.

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