Unbundled costs of transactions and external research as characteristics of actively managed Swedish mutual funds

Abstract: Using a unique dataset of 85 actively managed Swedish mutual funds investing in the Swedish equity markets, we study fund characteristics regarding cost structures. We find that the highest spenders on external research are large cap funds not managed by banks. Funds that are managed by banks have better execution in terms of price, and lower transaction costs characterize better-performing funds. We find no relationship between expenditure on external research and abnormal return overall, however, we find suggestive evidence that the return of expenditure on external research increases between funds with more idiosyncratic risk. With the MiFID II directives about to unbundle transaction costs and costs for external research throughout the EU in 2018, this thesis sheds light on fund cost structures in an economy where unbundling occurred as early as 2015.