Abstract:*

This paper documents that U.S. mutual funds with environmental and social (ES) mandates charge 9.5 to 12.7 basis points lower net expense ratios than comparable non-ES funds. This pricing anomaly is driven by the use of fee waivers, which offset the higher gross expense ratios of ES funds. We explore three explanations that are consistent with these findings: (1) ES funds exhibit lower expected returns, (2) heightened competition among ES funds exerts downward pressure on fees, and (3) fund families strategically use low ES fund fees to attract investors and cross-sell higher-fee products.

*Co-authored with A.J. Black (MIT)

General information:

Attendance to this seminar is possible by invitation only. Please send an e-mail to finsec-abs@uva.nl if your are interested in attending this seminar.