Asset Liquidity and Mutual Fund Management Fees: Evidence from Closed-End Mutual Funds

Charles Cullinan, Xiaochuan Zheng

Abstract


In this study, we assess whether the liquidity of a closed-end mutual fund’s investments (measured based on the fund’s fair value disclosures) is related to the management fee charged by the fund’s investment advisor. We posit that there will be incremental effort on the part of the advisor to identify and analyze less liquid investments, and that fund investors would be willing to pay for these incremental costs to access less-liquid segments of the market. Consistent with this expectation, we find a significantly positive relationship between the percentage of level 3 assets (the least liquid securities) and management fees. However, we do not find a significant relationship between level 2 securities (which are more liquid than level 3, but less liquid than level 1) and management fees. Overall, our results suggest that investments in the least liquid securities result in higher management fees.


Full Text: PDF DOI: 10.5430/afr.v1n2p139

Refbacks

  • There are currently no refbacks.


Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.

Accounting and Finance Research
ISSN 1927-5986 (Print)   ISSN 1927-5994 (Online)

Copyright © Sciedu Press

To make sure that you can receive messages from us, please add the 'Sciedu.ca' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.