Expected equity fund investor returns and the level of management fees - a study of Swedish funds and the relationship between managment fees and excess return

Abstract: The cost to investors of investing in mutual equity funds through management fees, could be substantial when compared to the return they generate. If the fees are fairly set, they should give investors a high excess return, termed alpha, when compared to a passive benchmark. Management fees have been shown to give negative excess return in the US market, and we regress the excess return of Swedish equity funds as estimated by CAPM on management fees. Our prediction is that higher management fees leads to lower alpha.