Summary: GAO was unable to determine the extent to which the growth in mutual fund assets during the 1990s provided the opportunity for mutual fund advisers to reduce fees on the funds they operated because most fund advisers' costs are not collected or disclosed. Using data provided by the mutual fund industry association, GAO found that the 480 percent growth in total revenues for advisers and other service providers for stock and bond funds was commensurate with the total 490 percent asset growth in those funds between 1990 and 1998. Studies have also found a mixed trend in fees across the industry. Although the largest mutual funds generally grew faster than the industry average, their average expense ratios declined for stock funds but not for bond funds. Asset growth usually resulted in lower expense ratios, but not all funds made reductions. Moreover, the mutual fund industry generally does not try to compete on the basis of fees. Although mutual funds disclose most charges for financial services in dollars, they do not provide amounts paid by individual investors in dollars. Furthermore, mutual fund fees are not a primary consideration for investors. Mutual fund directors are required to review fees but mutual funds' organizational structure embodies conflict of interest over fees. This conflict arises because the adviser has the incentive to maximize its own revenues; however, such action could come at the expense of the shareholders.
