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- Title
Are retail S&P 500 index funds a financial commodity? Insights for investors.
- Authors
Haslem, John A.; Baker, H. Kent; Smith, David M.
- Abstract
We examine whether retail S&P 500 Index funds are a financial commodity by comparing the expense-performance relation for index versus actively managed funds. The presumed commodity-like nature of index funds suggests that price competition should be more evident than with actively managed funds. Thus, expenses should not vary widely among funds tracking the same benchmark. We find a high level of dispersion in expense ratios across retail S&P 500 Index funds. Funds with higher expenses generally underperform because of 12b-I fees. We conclude that expenses are just as important to determining performance for index funds as they are for actively managed funds.
- Subjects
INDEX mutual funds; MUTUAL funds; PORTFOLIO management (Investments); ECONOMIC competition; FINANCIAL performance
- Publication
Financial Services Review, 2006, Vol 15, Issue 2, p99
- ISSN
1057-0810
- Publication type
Article