Investor advocates who initially thought the mutual scandals would lead to a downward trend of mutual fund fees are now saying expenses paid by shareholders will remain steady this year and possibly rise in 2005, TheStreet.com reports.
Experts such as Roy Weitz, who founded a popular Internet billboard known as Fundalarm.com, said the group of mutual fund companies that were cited for misconduct by regulators and subsequently ordered to lower fees are a small subset of the overall industry, which is still intent of hiking costs passed onto shareholders.
Morningstar analyst Bridget Hughes concurs that the mutual fund providers that managed to escape New York Attorney General Eliot Spitzer's wrath are under no pressure to curb fees. Some of the companies targeted by Spitzer, such as Alliance Capital Management, were initially overpriced.
Other experts disagree that the outcome of scandals will have no affect on mutual fund fees. Geoff Bobroff, a mutual fund consultant, notes that trustees are under increased pressure to stand up for investors by clamping down on excessive fees. Any widespread reduction in fees amounts to reverse in trajectory for the mutual fund industry. The median total fee of all U.S. equity fund fees has grown to 1.45% in 2003 from 1.33% in 1999, according to Lipper.