Determinants of management expense ratio for Canadian mutual funds

Abstract

This study examines how the management expense ratio varies across bank and non-bank financial institutions. The dataset containing 10,818 Canadian mutual funds is built from the Fundata website. While determining expenses other factors that were considered are: size and age of the fund, its asset classes, the geographical allocation of its securities, risk adjusted return and mutual fund versus ETF. The main findings are that banks charge lower MERs than non-bank financial institutions, probably because of economies of scope; larger funds benefit from economies of scale and charge a lower MER; older funds charge a higher MER; funds that give higher net return have a lower MER; equity funds are more expensive and ETFs are cheaper as compared to mutual funds.