WASHINGTON – The fees imposed by pension funds and mutual funds are virtually identical once the two entities are compared as "apples and apples" through sub-accounts, an Investment Company Institute economist concluded via a conference call Tuesday.

When administrative fees of mutual funds and public pension plans are broken down into "investment advisory fees," the costs are actually less for mutual funds with small and medium investment portfolios and just a shade higher when comparing the pensions to funds with large investment portfolios.

The mutual fund industry’s chief lobbyist group ripped into a previous study published in a 2001 Iowa law journal that said pension funds fees were strikingly lower than those of mutual funds.

Apparent flaws in the Iowa report, especially a lack of understanding that there are significantly more mutual fund accounts and varied balances within those accounts, were countered with a host of evidence by Sean Collins, a senior economist at the Washington trade association.

Spitzer Fires Back

But New York Attorney General Eliot Spitzer laid right back into the ICI’s reasoning yesterday, telling the New York Post that comparing retail and institutional sub-accounts is hardly fair reasoning, since sub-accounts comprise only 20% of all mutual funds.

"I love the ICI report. It proves my case," Spitzer said.

ICI spokesman John Collins could not immediately comment on Spitzer’s 20% figure, telling the Post that the ICI’s economists would look into the figure.

During the conference call, ICI President Matt Fink stressed that the Iowa report did not take into account that regular mutual fund advisory fees cover such important administrative duties such as asset allocation, individualized service and services "that extend far beyond the selection and monitoring of portfolio securities each day." The Iowa report, published in 2001 and titled "Mutual Fund Advisory Fees: The Cost of Conflicts of Interest," was authored by John Freeman and Stewart Brown,

"To get an apples-to-apples comparison you have to look at what pension funds are paying for and what mutual funds are paying for," Fink said.

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The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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