Relationship Of Open-end Fund Operating Expenses And Results

In recent years, with the continuous development of domestic capital market, the size of thefund industry is also growing. Securities investment funds are playing an increasingly importantrole in the current financial system, and the open-end fund is the mainstream part of thesecurities investment funds. There have been a great many of foreign relative researches on fund,while domestic research on the fund is still in its infancy. This paper studies the relation betweenfund operating expenses and performance, especially adding governance structure of fundmanagement companies and its management structure, to investigate the relation between fundoperating expenses and performance from different perspectives.In this paper, the sample is from2006to2012of contractual open-end funds, to study therelation between fund operating expenses and performance. The result shows that the relationbetween fund operating expenses and performance is affected by the stock market cycles. In bullphase, they have a significantly negative relationship. The fund operating expenses will decreasewith the performance’s rise. Meanwhile, the study also finds that they have the presence ofnon-linear inverted U-shaped relationship. In bear phase, due to the relatively weak market,operating expenses decrease with negative results rising. When the performance is over zero, theexpenses will rise with the increase in performance, showing an overall opening up of the twolines. The results is not only contributing to understand the relation of our open-end fundoperating expenses and performance, but also favoring the development of the fund managementcompany, providing suggestions to fund investors’ decisions and fund managers’ performance.