Mutual Fund Industry Competition and Concentration: International Evidence

Miguel A. Ferreira
Universidade Nova de Lisboa Faculdade de Economia Av. Marques da Fronteira, 20 1099-038 Lisbon, Portugal miguel.ferreira@fe.unl.pt

Sofia B. Ramos
ISCTE Business School Av. Foras Armadas Edifcio ISCTE 1649-026 Lisbon, Portugal sofia.ramos@iscte.pt

Abstract: This paper examines mutual fund industry competition and concentration using a sample of 27 countries. The indicators show that the mutual fund industry is concentrated worldwide and some industries present large fund complexes. Countries with common law and higher stock market turnover are associated with low level industry concentration. There is more industry contestability in countries with better quality of institutions and where regulation is more open. Bank concentration and simultaneous restrictions to engage new activities in the financial industry tend to decrease firm entry in the mutual fund industry. The launch of new funds is positively related with openness of regulation and negatively related with industry age. The overall level of fees tends to be higher in countries with low stock market turnover, where industry size is smaller and where foreign mutual fund companies have a larger market share. Moreover, fund proliferation seems to be an important aspect of competition as it is negatively related with mutual fund fees. Overall, the results do not indicate a direct relation between competition and concentration, similar to the findings for the banking industry. Nevertheless, our evidence seems to validate the contention that the degree of competition is important for the variety of products as we find a larger offer of funds in more competitive industries.

JEL: G15; G23; L11. Key Words: Mutual Funds; Industry Competition; Industry Concentration, Mutual Fund Fees.

Financial support from Fundao para a Cincia e Tecnologia is greatly acknowledged (POCI/EGE/57002/2004).

Mutual Fund Industry Competition and Concentration: International Evidence

March 2009 Abstract

This paper examines mutual fund industry competition and concentration using a sample of 27 countries. The indicators show that the mutual fund industry is concentrated worldwide and some industries present large fund complexes. Countries with common law and higher stock market turnover are associated with low level industry concentration. There is more industry contestability in countries with better quality of institutions and where regulation is more open. Bank concentration and simultaneous restrictions to engage new activities in the financial industry tend to decrease firm entry in the mutual fund industry. The launch of new funds is positively related with openness of regulation and negatively related with industry age. The overall level of fees tends to be higher in countries with low stock market turnover, where industry size is smaller and where foreign mutual fund companies have a larger market share. Moreover, fund proliferation seems to be an important aspect of competition as it is negatively related with mutual fund fees. Overall, the results do not indicate a direct relation between competition and concentration, similar to the findings for the banking industry. Nevertheless, our evidence seems to validate the contention that the degree of competition is important for the variety of products as we find a larger offer of funds in more competitive industries. JEL: G15; G23; L11. Key Words: Mutual Funds; Industry Competition; Industry Concentration, Mutual Fund Fees.

1. INTRODUCTION
The rapid development of the mutual fund industry worldwide has been documented and explained in several academic studies (e.g. Otten and Schweitzer (2002), Klapper, Sullas and Vittas (2004), Khorana, Servaes and Tufano (2005) and Ramos (2009)). However, an important aspect left out has been the concentration and the competition of the industry worldwide. Studying concentration and competition in the mutual fund industry is of paramount importance for several reasons. Similarly to other industries, the degree of competition is important for the quality, variety and costs of products. In other words, the lack of competition can create inefficiencies in fund diversity, performance, and fees. For instance, studies have documented about economies of scale not passing to investors or that on general the performance of funds is too poor for the level of fees charged (e.g. Gruber (1996), Korkeamaki and Smythe (2004) and Gil-Bazo and Ruiz-Verd (2007)). Second, there is evidence of distortions caused by competition inside categories and families. Since mutual funds flows are sensible to past performance, portfolio managers have incentives to manipulate their position in the category ranking by changing the fund volatility (e.g. Brown, Harlow and Starks (1996) and Chevalier and Ellison (1997)). Moreover, fund families are tempted to coordinate actions across funds in the family complex in order to enhance performance of the funds that are most valuable to the family, even if that comes at expenses of other funds. Gaspar, Massa and Matos (2006) conclude that favouritism generates distortions in delegated asset management. Therefore, competition in the mutual fund industry can exacerbate conflicts of interest between investors and fund families. Third, this is an issue relevant for financial regulators. In the U.S., fees are under the close inspection of regulators. The SEC and the U.S. General Accounting Office are among the authorities that produce regular reports on the issue1. Fee disclosure is considered crucial for investor-driven competition as investors can only exert fee pressure if they are fully aware of their level. Also, the European Union (EU) authorities have taken measures to foster competition in financial markets through the Investment Services Directive or the Undertakings for Collective Investment in Tradable Securities (UCITS) Directive, which regulates collective funds that can be sold across national boundaries within the EU. These funds can be marketed within all countries that are a part of the EU, provided that the fund and fund managers are registered within an EU country. Ramos (2009) report that the majority of funds domiciled in EU countries are also UCITS accounting for 77% of the value of the EU funds in 2005.

See http://www.sec.gov and http://www.gao.gov.

The literature that addresses the market structure of the financial industry worldwide has been mainly focusing on the banking industry2. For the mutual fund industry the evidence reported is only for the U.S.. Khorana and Servaes (2007) study competition over the period 1979-1998. They document that over that period, industry assets increased by a factor of twenty, the number of active fund families tripled, and the average market share of a family declined by two thirds. Other reported features of the market structure of the mutual fund industry are fund proliferation, fee dispersion and increased segmentation (see e.g. Massa (2003) and Hortasu and Syverson (2004)). Mutual fund fees have nevertheless attracted more the attention of researchers and have been studied for Spain (Gil-Bazo and Martinez (2003)), Finland (Korkeamaki and Smythe (2004)), Italy (Geranio and Zanotti (2005)) and worldwide (Khorana, Servaes and Tufano (2006)). This paper contributes to the literature by being the first to analyze mutual fund industry concentration and competition around the world using a novel data base of 27 developed and emerging market countries from almost 50,000 open-end mutual funds for the year of 2006. We document the following results. The mutual fund industry tends to be quite concentrated worldwide. There are few large companies that dominate the national industries, and several small companies. On average, the five largest administration companies account for 60% and portfolio management for 54% of the market share. The figure is higher when we focus on bond or equity mutual funds segments. Large fund complexes are present in countries such as Australia, Austria, Canada, Germany, the U.K. and the U.S. suggesting a more strong and developed mutual fund industry in those countries. The results indicate that countries with common law and higher stock market turnover are associated with low levels of industry concentration. A common feature of the organization of the mutual fund industry across countries seems to be the concentration of administrative tasks while portfolio management structure is more fragmented. In the large majority of the countries, the number of portfolio management companies is larger than the number of administrator companies.3 Industry contestability is higher, i.e. more firms competing and more entry of new firms, in countries with better quality of institutions and where regulation is more open. All the variables related with regulation like economic freedom, fund regulation and the level of restrictions faced by financial institutions are related with industry constestability. Bank concentration with simultaneous restrictions in engaging new activities in the

See Claessens, Demirgu-Kunt and Huizinga (2001), Barth, Caprio and Levine (2004), Claessens and Laeven (2004). Note that Chen, Hong, Huang and Kubik (2004) contend that larger mutual fund companies suffer from a form of diseconomies of scale, hierarchy costs that erode performance. According to Stein (2002) small companies are likely to achieve better performance because they process better soft information. In opposite, in large organizations with hierarchies, the process for agents fighting for having their ideas implemented will affect agents ex ante decisions of what ideas they want to work on. This happens because if the information is soft, then agents have a hard time convincing others of their ideas and it is more difficult to pass this information up the organisation.
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financial industry tends to decrease firm entry in the industry. Moreover, more developed financial systems have less entry of new firms. In the same line, the launch of new funds is also related with regulation. Industries with more open regulation and but also younger mutual fund industries tend to launch more new funds, a result similar to Claessens and Laeven (2004) for the banking industry. The level of segmentation is quite high in European countries. They show a large variety of mutual fund styles, while the Asian industry, with the exception of Japan and Singapore, shows the opposite. The evidence suggests that bond and particularly equity mutual funds as the most competitive mutual fund segments. The larger the entry of new firms, the larger the offer of bond and equity funds per capita. Fees differ substantially around the world even within asset classes and similar styles, similar to the findings of Khorana, Servaes and Tufano (2006). The U.S. stands out by the low level of annual fees. Fees tend to be higher in industries with low stock market turnover, and where industry size is smaller, which validates the hypothesis of economies of scale. Fees are higher in countries where foreign mutual fund companies have a larger market share. One possible explanation is that foreign companies can be attracted to enter in markets where they can charge higher fees and have higher revenues. On the other hand, foreign mutual fund companies can face higher costs when domiciling funds in a foreign market and that cost is reflected on fees. Fund proliferation seems to be also an important aspect of the competition in the industry. The rapid growing of the number of mutual funds described by Gruber (1996) has been interpreted as a competitive strategy to limit competition and increase market coverage of fund families (Massa (1998, 2003)). The results show that fund proliferation is negatively associated with the level of mutual fund fees. Fee proliferation has been reported for the U.S. (Massa (2003) and Hortasu and Syverson (2004)) but we also find it in industries where companies manage and introduce a large number of funds, like the ones with large fund complexes. Overall, the evidence suggests a great diversity of cases that challenge the stylised fact that a high competitive market is characterized by a large number of firms competing and of firm entry, lower concentration and lower prices. We do not find that concentration and competition in the mutual fund industry present a direct relation, similarly to the findings in Demirg-Kunt and Levine (2000) and Jansen and Haan (2003) for the banking industry. The paper has the following structure. Section 2 presents the data and discusses the determinants of industry competition and concentration. Section 3 presents competition indicators, focusing on the following aspects of market structure: constestability, industry segmentation, fund proliferation and fees. Section 4 analyzes concentration in the mutual fund industry. Section 5 analyzes the determinants of concentration and competition in the mutual fund industry. Section 6 analyses the potential relation between concentration and competition. Section 7 describes robustness checks and Section 8 concludes. 5

2. DATA AND EXPLANATORY VARIABLES

2.1. Data The mutual fund industry data are drawn from the Lipper Hindsight database. This database contains mutual funds characteristics from 27 developed and emerging market countries. We collect information about almost 50,000 open-end mutual funds for the year of 2006. The net value asset of individual funds is aggregated by domicile country in order to give the size of the national mutual fund industry. Some caveats are in order on this issue. First, the mutual fund industry has a global scope and many management companies sell funds in several countries. It is also quite common that mutual fund companies have funds domiciled abroad as off-shores. Second, investors' holdings in a country can be larger than the size of the national mutual fund industry since investors are likely to hold mutual funds domiciled in other countries. Therefore, the size of the mutual fund industry in this study refers to funds domiciled in the country, not to the assets managed by firms in the country or the holdings of country investors in mutual funds4. Table 1 describes our mutual fund sample by country. The first column reports the size of the mutual fund industry in USD million. These figures correspond to the sum of the individual funds domiciled in each country. We cross the coverage of funds by Lipper Hindsight with the statistics on mutual funds provided by the Investment Company Institute (2006). The total net asset value in our sample is $16.4 trillion which compares with $17.7 trillion worldwide. The breakdown by countries shows that the mutual fund industry is larger (in terms of net asset value) in the U.S. followed by France and the UK. The mutual fund industry is smaller in Indonesia and Malaysia. Table 1 also presents the number of funds (only primary) by countries. In absolute terms the U.S. presents more than 8,000 funds followed by Korea and France. Poland and China, two countries with young industries, have a small number of funds. (Table 1 around here) 2.2. Explaining Mutual Fund Industry Concentration and Competition This section examines the determinants of the level of concentration and competition in the mutual fund industry. Concentration and competition in the financial industry have been mainly analyzed for the banking industry. Demirg-Kunt and Levine (2000) find that bank concentration is negatively associated with restrictions on banking activity. Countries characterized by banks that engage in a wide range of financial activities tend to have relatively high levels of bank concentration. Claessens and Laeven (2004) analyze the

See also Khorana, Servaes and Tufano (2005) for a similar approach.

role of entry and activity regulations in the competitive environment of the banking industry. They find that openness to new entry is the most important competitive pressure. Following the previous literature, we assume that concentration and competition are endogenous variables determined by a set of exogenous variables that are presented and discussed next. 2.2.1. Quality of Legal Institutions and legal system To measure the quality of institutions we use the KKZ_Composite Index (KKZ_INDEX) an index constructed by Kaufman, Kraay and Zoido-Lobatn (1999) that has been used in the literature (e.g. Beck, Demirg-Kunt and Levine (2006)) to measure the overall level of institutional development. It is composed of the following items: voice and accountability, government effectiveness, political instability, regulatory quality, rule of law and control of corruption. In the line of previous work, we expect that countries with better institutions have less concentration and more competition and contestability. The quality of the legal environment as proxied by legal families is a determinant of a country's level of financial development. La Porta, Lopez de Silanes, Shleifer and Vishny (1997, 1998) advocate that the quality of the legal system is important for the enforcement of contracts capturing also the government's general attitude towards business. To gauge the impact of the legal system on the market structure of mutual fund industry we use a common law dummy variable (COMMON). Accordingly, we expect to find a positive relation between quality of institutions variables and industry competition (see La Porta, Lopez de Silanes, Shleifer and Vishny (1997, 1998), Levine (1999) and Levine, Loyaza and Beck (1999)). 2.2.2. Regulation and Economic Freedom Regulation and the level of economic freedom can be potential determinants of mutual fund industry concentration and competition. Regulation can be a mechanism by which entry of new competitors in an industry is restricted, increasing concentration and decreasing competition. Zingales (2004) states that in modern democracies, regulation is the result of political pressures exerted by different lobbies. In particular, incumbents tend to be more organized and thus more political powerful and regulation can be biased against entry and competition. To measure barriers to entry we use a set of variables described above. The main hypothesis is that barriers to competition intensify concentration and diminish competition in the mutual fund industry. To measure the overall level of economic freedom we use the index of economic freedom provided by the Heritage Foundation (ECON_FREEDOM). The index uses 10 specific freedoms such as business freedom, trade freedom, monetary freedom, freedom from government, fiscal freedom, property rights, investment freedom, financial freedom, freedom from corruption and is graded using a scale from 0 to 100, where 100 represent the maximum freedom. A score of 100 signifies an economic environment or set of policies that is 7

most conducive to economic freedom. This index has been used in the work of Claessens and Laeven (2004) and Beck, Demirg-Kunt and Levine (2006) to capture the general level of barriers to entry by new companies. Given the close relation between banks and the mutual fund industry, we are interested in the relation between banking regulation and mutual industry concentration and competition. To investigate that, we consider the level of restrictions faced by banks to enter in other financial activities such as securities activities and compete with mutual fund management companies. BANK_RESTRICT is a variable taken from Barth, Caprio and Levine (2001) and is a summary index of overall regulatory restrictiveness in items like Securities, Insurance, Real State and Non-financial firm ownership. It takes the values between 1 (least restrictive) and 4 (most restrictive). This index has been used by Claessens and Laeven (2004) and Beck, Demirg-Kunt and Levine (2006) to measure the level of economic freedom and institutional development. Fund specific regulation can also be a barrier to competition, therefore we use variables related with fund regulation like custodians independence (CUSTODIAN). Custodians are the parties that hold the securities of the fund, and their independence insures that the funds assets are not expropriated. Following Khorana, Servaes, and Tufano (2005, 2006) we create a dummy variable that assumes the value one if custodians are required to be independent from the mutual fund family. The data is from KPMG. Khorana, Servaes and Tufano (2006) use concentration in the banking systems as a proxy to barrier to competition when analysing the determinants of cross-country differences of fees. Similarly, we use BANKCONC, the market share of the five largest banks from Beck, Demirg-Kunt and Levine (2000). 2.2.3. Other Variables and Controls We also analyze the structure and development of the financial system by using the variable TURNOVER from the World Development Indicators. Like Ferreira, Miguel, and Ramos (2006) we assume that investor sophistication and the development of the financial system tends to increase with stock market turnover. We also control for other variables that are likely to affect the development of the financial system. We should expect to see more companies in more wealthy countries, with wealthier investors and where the industry is older. Hence, we consider several country indicators of economic development: the logarithm of GDP per capita (GDP), and the level of internet users (INTERNET) from World Development Indicators. The influence of industry age on competition and concentration measures can be dubious. Countries where the mutual fund industry is older and mature should have more developed and competitive markets. However, more mature industries are usually related with less new entries. On the other hand, due to considerable economies of scale in the financial industry there is a natural trend to concentration. Therefore, one can expect to see more industry concentration as the industry grows and becomes older, but also that older

industries have more firms competing. We consider the logarithm of the year the industry started in a country (IND_AGE). Data is from Khorana, Servaes and Tufano (2005). Table 2 displays all the referred variables. (Insert Table 2)

3. MUTUAL FUND INDUSTRY COMPETITION

In this section we analyze some aspects of the competition in the mutual fund industry. The key driver of the mutual fund industry competition seems to be that the fact abnormal past performance originates a substantial amount of fund inflows. Early studies like Spitz (1970), Chevalier and Ellison (1997) and Sirri and Tufano (1998) have documented that abnormal positive returns generate disproportionately more inflows than abnormal negative returns would generate outflows. In addition, fund performance is also important because of the spillover" effect that the performance of a fund provides to all the other funds belonging to the same family. Nanda, Wang and Zheng (2004) show that star performance results in greater cash inflow to the fund and to other funds in its family. Moreover, families with higher variation in investment strategies across funds are shown to be more likely to generate star performance. Massa (2003) argues that the proliferation of funds is originated by the spillover effect that the performance of a fund provides to all other funds belonging to the same family. 3.1. Contestability A main element of economic models of competition is the number of firms competing. The usual claim is that the larger the number of rival firms, the more choices available to consumers and the greater the likelihood of competitive pricing. Thus the first element of competition we analyze is the number of firms in the mutual fund industry. We study the mutual fund industry competition worldwide by focusing on fund administrator and portfolio management companies. The administrator company oversees the performance of other companies that provide services to the funds operations and is responsible for calculating NAV and supplying the price and dividend information. The portfolio management company is responsible for managing the portfolio of the fund. Let us introduce the following notation that we use through the paper: N is the number of management companies in each country; Nf is the total number of mutual funds in each country and Pop is the total population of a country in millions. We consider several country-level measures of the mutual fund industry competition: Number of management companies per million inhabitants (N/Pop). This variable indicates the number of available companies per capita (i.e., standardized by the country population) and therefore we expect that the larger the number of companies per capita, the higher is the expected the level of competition. 9

Market share of foreign firms in a country: (Foreign_mf_sh). The presence of foreign competitors is usually related with fewer barriers to entry in the industry. Therefore Foreign_mf_sh is a measure of the openness of domestic mutual fund industry to foreign competition and can be indicative of the level of competition.

Coates and Hubbard (2006) refer that the most direct indicator of barriers to entry and expansion is the extent of actual firm entry and existing firm expansion. To analyze the entry of new companies, we compute the annual number of new companies from 2003 through 2006. Then, we compute the annual average of new companies denoted New_comp. These figures are then used to compute the following ratios: The average number of new companies to the total number of new management companies (New_comp/N). This ratio will express how much of the existing companies are recent companies, being indicative of industry turnover. The average number of new management companies per inhabitants (New_comp/Pop). It will be indicative of the level of constestability of the industry. A priori in an industry where many companies exist and there is a rapid pace of firm entry is a competitive market. However, it must take into account that younger industries are usually related with a rapid pace of new entries as well as that the ratios are largely determined by the existing number of companies and population. Table 3 summarizes industry competition measures by country. Panel A reports data on administrator companies and Panel B on portfolio management companies. The first two columns present the total number of companies and the number of companies per million inhabitants. The first column of each panel reports the total number of companies by country. In Panel A (data was not available for the U.S.), France has the largest number of administrator companies, while Poland has the lowest. Several other European countries have also a large absolute number of companies such as the UK, Germany and Spain. Singapore presents the largest number of administrator companies, 9.46 per million, and Austria has the largest number of portfolio management companies per million around 21. India and China present the smallest value (near zero) for that indicator, as they are overpopulated countries. Panel B of Table 3 reports competition measures by country using portfolio management companies (now including the U.S.). The average number of portfolio management companies per country is 118 (97 excluding the U.S.), larger than the average number of administrator companies 63. This seems to be one of the main features of the organization of the mutual fund industry. Administrative tasks are more concentrated while the portfolio management structure is more fragmented. In countries like Austria, Belgium, Indonesia,

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Finland, Switzerland and the UK, the number of portfolio management companies is more than the double of administrator companies. There are also countries that do not present differences in both such as China, India, Japan, Portugal and Taiwan. (Insert Table 3 around here) Lastly, we analyze the presence of foreign portfolio management companies. Foreign companies have a large market share in countries such as Poland, Singapore, Indonesia, while domestic companies dominate in Belgium, Switzerland and Sweden. Note that we cannot conclude for the absence of contestability in these countries and that foreign companies face barriers in entering in the market, as what we observe is the outcome of competition. Table 4 exhibits indicators on market entry, more precisely new companies. Australia and France present in absolute terms the largest number of new administrator companies. The U.S., Australia and the U.K. have the largest entry of portfolio management companies in the period 2003-2006. When we focus on new companies per million inhabitants, Australia and Singapore present the higher values for administrator companies and Switzerland and Austria for portfolio management companies, while overpopulated countries such as India, China and Indonesia present the lowest scores. Note that Belgium did not have any new administrator company in the period analyzed. New firms are a large percentage of the actual ones in countries like China and Australia, for administrator companies, and in China and India for portfolio management companies. New firms are a small percentage of the existing ones in Belgium for administrator companies and in Norway and Spain for portfolio management companies. (Insert Table 4) Table 5 analyzes competition indicators for the bond and equity mutual fund sector using portfolio management companies. Panel A reports data on bond funds and Panel B on equity funds. In both asset segments, the U.S., the U.K. and France have a larger number of firms competing. Austria and Switzerland present the highest number of administrator companies per million inhabitants both for bond and equity funds, while again over populated countries present the lowest value. The number of portfolio management companies is larger in Austria and Switzerland both for bond and equity funds. Other countries with a larger number of firms are Denmark, Finland and Singapore. The results must be taken with caution because the indicators are influenced by the standardization. For instance, Canada, Spain, France, Germany and the U.S. are countries with a large number of firms competing in absolute terms, but when standardized by the population the ratio becomes small. In Austria and Switzerland there is a large number of firms competing in absolute terms and per capita, while Portugal, Poland and Thailand show the opposite, a small absolute and per capita number of firms competing as well as 11

firm entry. Belgium and Indonesia are countries with a fair number of firms competing but with a low pace of firm entry. (Insert Table 5) 3.2. Performance versus non Performance Competition As referred above, firms try to gain performance in order to gain market share. Gaspar, Massa and Matos (2006) find some evidence that mutual fund families strategically allocate performance across their member funds favoring those more likely to generate higher fee income or future inflows. These funds will not only generate inflows for the fund itself but for the all family. Guedj and Papastaikoudi (2005) find that the better performing funds in a family have a higher probability of getting more managers, one of the main available resources. However, performance is not the only competitive variable explored by mutual fund firms. Many studies have documented investor heterogeneity5 in mutual funds. Investors have different profiles and investment needs that can be explored by fund complexes. Cristoffersen and Musto (2002) advocate that one reason why funds charge different prices to their investors is that they face different demand curves. Gil-Bazu and RuizVerdu (2007) document strategic fee-setting by mutual funds in the presence of investors with different degrees of sensitivity to performance. Massa (1998) advocate that fund and category proliferation phenomena can be seen as marketing strategies used by the managing companies to exploit investors' heterogeneity. These aspects are discussed in more detail below. 3.2.1. Category proliferation The launch of several styles or categories of mutual funds has been well documented (e.g. Massa (2003) and Teo and Woo (2004)). Given that funds do not seem to compete across categories (Navone (2003)), by launching funds in new categories, firms can avoid cannibalism within funds of the same family and gain market share. Khorana and Servaes (2007) report that product differentiation strategies are effective in obtaining market share. Families that perform better, and start more differentiated funds from existing offerings relative to the competition (a measure of innovation6) have a larger market share. Therefore more competition at the firm level should induce more category variety. Note that if the strategy is successful, i.e. if fund complexes that offer more styles are likely to gain market share, then concentration in the industry can also increase. To gauge a sense of style proliferation worldwide, we analyse mutual fund style variety using Lipper Global Style Classification.

5 6

See for instance Hortasu and Syverson (2004) and ONeal (2004). Style variety can also be understood as a sign of industry and investor sophistication.

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Table 6 shows the results presenting style varieties per country differentiating the two main asset styles, bond and equity funds. The first columns show the total number of style variety in the industry. The average number is 57 styles which also coincides with the median. Thus half of the sample of the industries has more than 57 categories of funds, almost all European countries with the exception of Canada and Singapore. The next two columns show the number of styles for equity and bond funds. There is a larger variety of bond styles than equity styles explainable by the type of categorisation used by Lipper. The standard deviation in equity styles in quite high. There is a group of countries with a large equity variety like Austria, Finland, France, Germany, Italy, Japan, Spain and Switzerland. On the other extreme, a group of countries like China, India, Indonesia, Korea, Malaysia, Taiwan and Thailand where industry has a small number of styles. For bond mutual funds, China, Indonesia, Thailand and Poland show low variety, while countries like France, Germany, Singapore, Switzerland and the U.K. have a large variety of bond styles. (Insert Table 6 around here) In sum, Asian countries present a lower number of style varieties for bond and equity funds maybe due to the recent introduction of the industry. European countries like Austria, Belgium, France, Germany, Switzerland and the U.K. have a large variety of styles. 3.2.2. Fund proliferation Early studies like Gruber (1996) report a growing number of mutual funds despite the apparent managers inability for achieving superior performance. Massa (1998) argues that fund proliferation phenomena can be seen as marketing strategies used by the managing companies to exploit investors' heterogeneity. He explains category and fund proliferation providing an industry-specific micro foundation on the basis of the "spillover" that the performance of a fund provides to all the other funds belonging to the same family. Massa (2003) adds that fund proliferation becomes an additional tool that can be used to limit competition and increase market coverage. On the empirical side, Khorana and Servaes (1999) find that large families and families that have more experience in opening funds in the past are more likely to open new funds. Note that an additional reason that can make larger firms generate more funds, is that the cost of generating a new fund can be smaller for large families as they can benefit from economies of scale and scope. Hence, it is likely that more competition among mutual fund firms should lead to a larger offer of mutual funds and to larger families having a higher number of fund. Note again that this also implies that if the competing strategy is effective, i.e. launching more funds is effective in gaining market share, it is likely to increase concentration. Evidence from Khorana and Servaes (2007) shows that families that perform better and start more funds to the competition have higher market share.

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To gauge fund proliferation, we compute the average number of funds per company (Nf/N). This measure gives an indication of fund diversity, and is likely to be related with fund competition in a country. Less competitive industries are likely to display a smaller number of funds per family, but note also, that industries in an early stage of development have a smaller number of funds. We also analyze the entry of new funds from 2003 through 2006. We then compute the annual average of new funds (New_funds7). The following ratios are then analyzed: the average number of new funds to the total number of funds (New_funds/Nf); the average number of new funds per management company (New_funds/N); the average number of new funds per million inhabitants (New_funds/Pop). The ratios express how much of the existing funds are recent funds, being indicative of industry turnover, but also of the degree of innovation of firms, which might be a reflex of the level of fund competition. If an industry has a small number of funds and/or launches few new funds, it can be read as sign of barriers to firms expansion and concomitantly, little industry competition. Yet, it can also be related with two other cases. One is the industry onset, when there is a small number of existing funds and a high number of new ones. The other is industry maturity characterized by the opposite: a large number of existing funds and a small number of entries of new funds. Table 7 reports the results. Panel A reports general indicators showing the results of the number of funds per capita (Nf/Pop), the ratio of new funds in the total funds (New_funds/Nf) and the number of new funds per capita (New_funds/Pop). Australia, Austria, Belgium, Finland, France, Korea, Singapore and Switzerland have a large number of funds per capita while China, India, Indonesia and Poland a small number. Note that new funds are a large percentage of total existing funds in Asian countries like Korea, China, India, Indonesia and Thailand, while in European countries like Belgium, Netherlands, Norway and Sweden, they are a very small percentage. Countries that present a large number of funds per capita are Korea, Australia, Austria, Finland, Singapore and Switzerland, while China, India, Indonesia and Poland present a small number of new funds per capita. We next analyze the number of funds as well as the number of new funds managed by firms. First for administrator companies (Panel B) and then for portfolio management companies (Panel C). In Korea, Thailand, Australia, Belgium and Japan, administrator firms manage on average a large number of funds while in the Netherlands, Sweden, Germany, China, Poland, Malaysia and Taiwan they administrate a small number of funds. Administrator firms in Korea, Thailand and Australia launch a high number of new funds while in the Netherlands, Sweden, Germany, Norway and the UK, they are not likely to introduce many new funds.

We use information on the launching date of the fund and for the companies when the first fund was launched. We also computed New_funds using only data from 2004 to 2006 and results were the same.

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Korea, Thailand and Japan present a high number of funds and new funds per portfolio management company while in the Netherlands, Germany and the U.K. we find the inverse. Portfolio management companies offer on average a small number of funds and launch few new funds. Then we focus on the number of funds owned by the five largest companies (Nf_CR5), and compared with the average number of fund owned by a company in a country. Table 7 shows the average number of funds owned by the five largest companies versus the average number of funds owned by company. We find that the five largest companies own six times more funds than the average company. These figures are higher for countries like Australia (15 more), Austria (14 more), Canada (14 more), Germany (13 more), the U.K. (11 more) and the U.S. (12 more). With low asymmetry in the size of families, we find countries such as China, India, Poland, Portugal, Taiwan and Thailand, where the largest five companies own at maximum 2 times more funds than the average fund company. (Insert Table 7) The existing number of funds and the launch of new funds seems much determined by the age of the industry. Asian countries tend to launch many new funds maybe because the industry is recent. In contrast, European countries have a very slow pace of new funds, although they have a large number of existing competing funds. The exception is Poland where there is a small number of funds as well of entry of new funds. The size of firms is quite asymmetric in countries like Australia, Germany, the U.K. and the U.S., where we find big fund families but many small firms too. 3.2.3. Fee level and differentiation One of the features of a competitive structure is low prices, which in the mutual fund industry case substantiates in lower fees. This contrasts with the profit maximization logic wheres by construction companies aim to increase fees in order to maximize revenues. Fees around the world Fund companies charge investors fees in order to compensate for the management costs of the fund (annual charges). Fees compensate the funds manager for the expenses she incurs for providing its services, including security research and analysis. Fees also pay other administrative expenses resulting from the provision of record keeping and transactions services to shareholders like providing statements and reports, disbursing dividends, custodial services, taxes, auditing and legal costs. In addition, mutual funds often charge a sale surcharge (loads) when the investors purchase (initial charges or front-end load) or sell shares

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(redemption charges back-end load)8. Chordia (1996) argues that investors who redeem fund shares impose externalities on those who do not, from liquidation of securities; this obliges the fund to have a higher cash position reducing performance. Thus, by making redemptions expensive, a mutual fund dissuades investors from redeeming shares and it is able to invest in a more risky portfolio to obtain higher performance. Greene, Hodges and Rakowski (2007) find that the redemption fee is an effective tool in controlling the volatility of fund flows. The key question for firms is to know how fund flows vary with fees, or using a more economic language to know the flowfee elasticity. Empirical evidence shows that investors seem more sensible to loads than expensive ratios (see Barber, Odean and Zheng (2005) and Wilcox (2003)). Khorana and Servaes (2007) find that price competition is important in the industry. Families that charge lower fees than the competition gain market share, but only if these fees are above average to begin with. In addition, fees charged explicitly for marketing and distribution (12b-1 fees) have a positive impact on market share. Table 8 show the level of annual fees in the mutual fund industry in our sample. The first column shows the average fee across all funds of the industry. Fees are high in Poland, Spain9, Italy, India and Canada and lower in Korea, Belgium, Taiwan, the U.S. and Thailand. The other columns report average fees according to asset categories: bond, equity, mixed asset, money market. Fees are systematically high in all asset categories in Poland, Spain and Italy and systematic low across assets in Belgium, Taiwan, Thailand and the U.S.. In fact the U.S. appears with a favorable fee gap with all other countries of the sample. The trend of decreasing fees in the U.S. is confirmed in a recent analysis reporting that mutual fund fees and expenses fell to their lowest levels in more than a quarter century during 2005 (ICI, 2006). In equity funds, fees are high in Poland, Spain, Korea, Portugal and Italy, while in Taiwan, U.S., Belgium, India, the Netherlands and Switzerland are below the sample average. The classical competition hypothesis states that in a competitive industry prices are lower. However, the global average level of fees is not sufficient to infer about the competitiveness of the market as the level of fees depend also in other factors like economies of scale, distribution costs, regulation and investment culture (Khorana, Servaes and Tufano (2006)10) or investment objectives (Mack (1993), Keim and Madhavan

The U.S. mutual fee structure is also characterized by class shares differentiated in the load structure and the 12b-1 distribution fee spent on advertising, marketing, and distribution services or on commissions to sales representatives. Gil-Bazo and Martinez (2003) already reported that Spain ranks first in terms of average mutual fund fees among similar countries. Khorana, Servaes and Tufano (2006) report that larger funds and fund complexes charge lower fees and that fund fees are lower in countries with higher investor protection. Mack (1993) report that funds on small caps or international
10 9

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(1997)). Therefore, it is not possible to conclude for the absence of competition just because in an industry fees are higher. (Insert table 8) Fee proliferation A striking feature reported for the mutual fund industry has been fee proliferation. Hortasu and Syverson (2004) find a large variation in fees for an homogenous class of funds like index funds on S&P 500. Cristoffersen and Musto (2002) advocate that one reason why funds charge different prices to their investors is that they face different demand curves. Different investment needs of the investors like long term versus short term investors, or informed versus non informed investors can originate a differentiated fee structure. Evidence shows that this is a successful competition tool. Nanda, Wang and Zheng (2003) find that multipleclass of funds attracts significantly new money than single class of funds. According to Coates and Hubbard (2006) price dispersion in highly competitive markets is well documented by economists. It is possible to find different prices for identical items across types of outlets, such as full service department stores versus mass merchandiser price discount stores. Price dispersion in homogeneous good markets is partly attributed to search costs. Given that consumers lack perfect information, they search up to the point where search costs just exceed the expected lower price. Thus, search costs, including the opportunity costs of an investors time, provide a basis for price dispersion in competitive markets. To measure fee proliferation we compute fee dispersion across funds following Massa (2003) and Hortasu and Syverson (2004). To see how industry competition is related with fee proliferation we select fund styles with the largest number of funds competing. Table 9 shows for each country the category according to Lipper Global Style with more funds competing. We report the number of funds, the average fee and standard deviation of fees. The first thing to notice is the diversity of preferences of investors, revealing heterogeneity in investors from different countries. In some countries, the category/style where most funds compete is the domestic equity market. In others, funds on the domestic bond market and in others, protected and guaranteed funds. Given that different styles will have different fees by construction (e.g. bond fund fees are generally smaller than equity funds fees), fees are not directly comparable on the table. Therefore we decide to follow another approach and compare more similar (competitive) styles. For each country, we select the money market, bond and global style with the largest number of funds competing. We also select equity funds on the domestic equity market due to home bias preferences (see Lewis (1999) for survey on home bias literature).

companies are more expensive. Keim and Madhavan (1997) find a large dispersion of transaction costs for different investment styles.

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Table 10 reports the number of funds competing, average fee and fee dispersion in columns for the selected categories. Panel A shows the money market style with more funds competing in each country. A priori one could think that is a rather homogeneous segment but we find great disparity in fees. Fees in the segment are also in line with the evidence on Table 8. Panel B shows fee dispersion on the bond mutual fund style with more funds competing according to Lipper categorization. It seems that bond funds that invest in the domestic bond market are the most chosen in most countries, except for Spain and Taiwan. Again we find great disparity of fees in countries. Similarly to the money market, Poland presents higher fees. Then Panel C shows funds competing on domestic equity market. Note that in some countries it is not only the domestic market. Fees are lower in the U.S. and higher in Poland. Finally, Panel D shows the number of funds for Lipper Equity Global Style. Strikingly, investing abroad has an average lower fee than for instance investing in domestic equity market. This is strikingly given that for instance transaction costs are normally higher when investing abroad (Mack (1993)), and that fund size is smaller usually when investing outside (Ferreira, Miguel and Ramos (2006)), therefore they are likely to benefit from lower economies of scale. (Insert table 10) To analyze dispersion, we look at standard deviation of fees but in relative terms since the level of fees in countries is also quite different. Countries that tend to show low dispersion across all fund categories are China, India, Italy, Malaysia, and Taiwan, mainly countries where the industry is at an early stage. Poland shows low dispersion in equity funds. Countries that show systematic high dispersion in the selected styles are Canada, Korea, Switzerland and Singapore. The U.S. shows high dispersion in equity domestic funds, while Australia, Denmark and the Netherlands present for bond funds. Correlation results show that fee dispersion in equity funds increases with the number of funds that companies manage. In other words, in industries where companies have more funds and launch more new funds, there is higher fee dispersion, mainly in equity funds.

4. MUTUAL FUND INDUSTRY CONCENTRATION

In this section we discuss several facts that can affect concentration in the mutual fund industry and present several indicators of the mutual fund industry. 4.1. Measures of Concentration and Market Structure We consider several country-level measures of the mutual fund industry concentration: Average market share in a country (Av_mk_sh). In general, if a country has a large number of companies, the average market share is smaller.

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Concentration ratios (CR). CR5 and CR10 are respectively the market shares of the largest five and ten companies in terms of assets under management. The higher is the market share of the largest companies, the higher is the industry concentration.

Herfindahl-Hirschman Index (HHI). The Herfindahl-Hirschman Index is a widely used indicator of the level of concentration within an industry. This index is calculated at the sum of the squared market shares within each country and therefore stresses the importance of larger companies by assigning them a greater weight. Larger values of the Herfindahl-Hirschman index indicates higher industry concentration.

A weakness of the above concentration measures is that they are dependent on the total number of the companies, which in turn depends usually on the size of the country. Therefore the smaller the number of administrator or management companies, the larger tends to be industry concentration. Table 11 analysis concentration in the mutual fund industry using administrator companies (Panel A) and portfolio management companies (Panel B). The first column of each panel reports the total number of companies by country. The average market share (Av_mk_sh) varies considerably across countries. Poland has the largest average market share with 7.1%, while France presents the lowest average market share with 0.4%. In countries such as Belgium, Indonesia and Thailand, administrator companies have a large average market share. The concentration ratios CR5 and CR10 show a similar picture. Belgium presents the highest level of concentration. The five largest companies represent 87% of the market and the ten largest sum up to 98%. Indonesia, Poland, Portugal, and Finland are other countries were CR5 is over 80%. We recall that all these countries have a small number of administrator companies. In contrast, Taiwan presents the smallest concentration. The five largest companies represent 32% of the market and the ten largest have around 55.5%. Overall, the analysis suggests a high level of concentration worldwide as the five largest companies in each country have on average 60% of the market share and the ten largest 78%. Note that the CR10 in Belgium is 98% while the U.K. presents the lowest value with 50%. The Herfindahl-Hirschman Index is consistent with the previous characterization. Indonesia, Belgium and Poland have the highest HHI and the U.K. the lowest. Panel B of Table 11 reports concentration measures by country using portfolio management companies (now including the U.S.). In Portugal, portfolio management companies have the largest average market share with 5.6%, followed by Thailand and Poland with 5.3% and 5.0% respectively. The average market share is smallest in the U.S. with 0.1%, followed by the U.K. and France with 0.2% and 0.3% respectively. The table also presents cumulative market shares of the largest five and ten portfolio management companies. Portugal presents the highest industry concentration with the five largest companies representing 81% of 19

market and the ten largest representing 94.5%, while the U.K. and the U.S. present the lowest levels of industry concentration around 26% and 32% for CR5. The Herfindahl-Hirschman Index presents similar pattern. Belgium presents the highest index, followed by Portugal and the U.S. and the U.K. present the lowest values for HHI. To gauge how countries group in respect to concentration, we depict the two variables CR5 and HHI in Graph 1. Three groups are identified. Countries with a low level of industry concentration such as Canada, China, France, Korea, Taiwan, the U.K. and the U.S.. The average of CR5 of these groups of countries is 0.35 and the HHI is 0.04. Note that this group has countries from Europe, Asia and North America and also countries where the industry is young like China and Korea and mature like the U.K. and the U.S.. On the other extreme, we have a group with a high level of concentration on the industry. The average CR5 of the group is 0.71 more than the double of the first group, and the average HHI is 0.13, three times higher than the first group. With the exception of Thailand, all the members of the group are European countries. There is also an in-between group with an average CR5 of 0.53 and HHI equal to 0.08. (Insert Graph 1) 4.2. Analyzing Concentration on Bond and Equity Mutual Funds We next analyze industry concentration in the bond and equity mutual funds, the most representative asset classes on Table 12. With few exceptions11, industry concentration is larger in bond and equity mutual funds than on the whole industry. The average HHI for portfolio management for the sample is 0.128 for the bond sector and 0.105 for the equity sector against 0.087 for total. The next subsection presents a more detailed analysis. 4.2.1. Bond Mutual Funds Companies that administer bond funds have the largest average market share in Poland with a 9.1% of market share, and the lowest, 0.8 % of the market, in France. Belgium presents the highest concentration ratio. The five largest administration companies concentrate 97% of the market, while in India they only have 45% of market share. In five countries, the ten largest companies have more than 99% of market share. They are Belgium, Portugal, Denmark, Poland and Norway, all from Europe. Analysing portfolio management companies for bond mutual funds, Portugal has the largest market share with 8.3% and the U.S. the lowest around 0.4%. Portugal also presents the highest CR5 and CR10, with 96%

The exceptions for bond mutual funds are Norway, the Netherlands and Indonesia. For equity mutual funds are: Belgium, Poland, Spain, Denmark, Austria, Italy, Australia, Canada and France.

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and 99.7%, respectively. The U.S. has again the lowest concentration ratios CR5 and CR10, 38% and 52% respectively. Overall, the HHI is larger for Poland, Thailand, Belgium and Finland. 4.2.2. Equity mutual funds Administrator companies of equity mutual funds in Indonesia have on average a market share around 10%, while in France and in the U.K. is 0.5% and 0.6% respectively. The CR5 is higher for Indonesia (99.5%), followed by Portugal (90%). The U.K. presents the lowest concentration ratios CR5 and CR10, with 37.3% and 50.5% respectively. Portfolio management companies of equity mutual funds in Portugal have the largest average market share with 7.1% of the market, while in the U.S. they have the lowest 0.2%. In the same line, CR5 and CR10 are higher in Portugal, 90% and 98%, respectively. The concentration indicators have the lowest values in the U.K.. The HHI shows that concentration is higher in Indonesia, followed by Portugal. In contrast, the indicator is lower in the U.K.. (Insert table 12) Graph 2 depicts how countries cluster concerning concentration in bond and equity funds based on the HHI. We find a group of countries with very low concentration: Australia, Canada, France, Italy, U.K. and the U.S.. The group average HHI for bond funds is 0.06 and for equity funds is 0.04. A second cluster of countries with HHI for bonds equal to 0.10 and for equity 0.09 is composed by Austria, China, Denmark, India, Japan, Korea, Spain and Taiwan. The group has a slightly higher concentration than the first one. Countries that present high level of concentration in both sectors are Belgium, Malaysia and Portugal. Countries that present high concentration for bond funds are Finland, Poland, Singapore and Thailand while for equity just Indonesia. (Insert Graph 2) Overall, the mutual fund industry tends to be quite concentrated worldwide. There are few large companies, and several small companies. Almost all the countries with high levels of concentration are European (Belgium, Finland, the Netherlands, Norway, Poland, Portugal, and Sweden) with the exception of Thailand. But also find some European countries with low levels of concentration like France and the U.K..

5. EMPIRICAL RESULTS
This section presents the results from cross-country regressions to assess the factors related with mutual fund industry competition and competition. The dependent variables are ratios computed in sections 3 and 4. The model selection is guided by concerns about the paucity of observations comparative to a large number of explanatory variables, the existence of missing observations and correlation between explanatory variables. 21

All the models are estimated using ordinary least squares (OLS) with an intercept. The tables report the estimated coefficients, their statistical significance, the adjusted R2 and the number of observations. 5.1. Mutual Fund Industry Concentration Table 13 analysis the determinants of the mutual fund industry concentration. The dependent variable is the Herfindahl-Hirschman Index of portfolio management companies. The first variables tested are the KKZ_INDEX, COMMON and TURNOVER. COMMON and TURNOVER are statistically significant at 5% level indicating that countries from common law countries and with stock markets with higher turnover have less industry concentration. Then, we add at the turn several variables related with regulation such as ECON_FREEDOM, BANK_RESTRICT and CUSTODIAN but none is statistically significant (regressions (2)-(4)). Only in regression (5) bank concentration is statistically significant indicating that countries with bank concentration also have mutual fund industry concentration. Some readers might interpret this as indicating that concentration in the banking industry might be a barrier to entry in the mutual fund industry. Finally, we test several controls commonly used in the literature such as GDP, industry age and INTERNET none is statistically significant (regressions (6)-(8)). 5.2. Mutual Fund Industry Contestability Table 14 analyses the factors affecting firm entry in the industry. The dependent variables of the OLS regressions are the number of portfolio management companies per capita (N/Pop) in Panel A and the entry of new portfolio management companies per capita (New_comp/Pop) in Panel B. The results in table 14 show that countries with better institutions have more firms competing per million inhabitants as the coefficient shows a positive relation with the index that measures the quality of institutions. However, the variable COMMON that represents the legal family is not related with the number of firms competing. The results also indicate that more active trading seems negatively is associated with a lower ratio of mutual fund companies. The variable TURNOVER is negatively related with the number of companies per million. Asian countries may drive the result as they have large population and very active trading. Consistent with the regulation hypothesis, we find that variables related with regulation show statistical significance. The variable ECONOMIC_FREEDOM is positively related with the number of firms competing. In the same line, countries where banks face more restrictions to enter in other financial activities have less portfolio manager companies per million inhabitants. Also, fund regulation proxied by the variable CUSTODIAN has a positive effect on the number of firms competing indicating that countries where custodian companies are required to be independent have more companies per capita.

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Finally, we interact the variables BANK_RESTRICT and BANKCONC. The coefficient shows that countries with higher levels of bank concentration and where financial intermediaries face more restrictions to engage new activities have a lower number of firms competing. Panel B analyzes contestability using as dependent variable the entry of new companies per million inhabitants. Like in Panel A, the variable that proxies the quality of institutions has a positive effect on the entry of new firms. Similarly, the results show that TURNOVER is negatively related with the entry of new companies, indicating that more active financial systems have less entry of new firms. Again we find that the variables related with regulation are statistically significant. Economic freedom has positive effect on the entry of new companies, while the existence of bank restrictions has a negative effect. The variable CUSTODIAN which proxies for fund regulation has a positive effect on the number of new companies. The variables GDP and industry age do not seem to affect the entry of new mutual fund firms. Similarly, we interact the variables BANK_RESTRICT and BANKCONC. The coefficient shows that countries with higher levels of bank concentration and where financial intermediaries face more restrictions to engage new activities have a low number of new mutual fund firms. Overall, results are very similar for variables of Panel A and B. Barriers to entry, measured by bank restrictions, absence of economic freedom or fund regulation affect firm entry. The quality of institutions is positively related with the contestability in the industry. 5.3. Mutual Fund Firm Expansion We now analyze firm expansion in the mutual fund industry. We consider that the possibility of firm expansion is dependent on the launching of new products. Therefore our dependent variables are the ratios related with the launch of new funds: new funds per company (Panel A) and new funds per million inhabitants (Panel B). Table 15 reports the OLS results for both variables. The quality of legal system does not seem to affect the launch of new funds. None of the variables is statistically significant (for sake of brevity results not reported). On the contrary, regulation seems to affect firm expansion. Industries with more economic freedom and where there is custodian independence have more new funds. Also bank restrictions are negatively associated with the launch of new funds. Ramos (2009) report that many industries face strong regulatory barriers to invest abroad. For instance, China and India funds invest only in their national markets. While countries where the industry is recent like Korea, Malaysia, Poland, Taiwan and Thailand invest more than 80% of their assets in their home market. As expected, older industries tend to launch less new funds.

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5.4. Mutual Fund Fees Table 16 analyses the factors affecting the level of fees on the mutual fund industry. Contrary to Khorana, Servaes and Tufano (2006), our results do not find any relation between average fees and the variables proxing for quality of institutions and regulation. Also regulation variables do not show any relation with annual fees. More active stock markets have lower fees as the variable TURNOVER shows a statistical significant negative relation with fees. The stronger finding is that industries where foreign firms have a larger market share (foreign_mf_sh) have larger annual fees12. One possible explanation is that foreign companies can be attracted to enter markets where they can charge higher fees and have larger revenues. On the other hand, foreign mutual fund companies can have higher costs when domiciling funds in a foreign market and that can be reflected on fees. Since economies of scale are likely to affect fees, we use the industry size measured in millions of dollars (IND_SIZE) and see whether it is related with fees. The results show that larger industries measured in USD dollars tend to charge lower fees, corroborating the existence of economies of scale in the industry. The results are in line with Khorana, Servaes and Tufano (2006) that report that larger funds and fund complexes charge lower fees. Also, we interact an EUROPE dummy with foreign market share and we can see that the positive relation between the share of foreign fund firms and fees is particularly strong in European countries. The classical competition hypotheses state that in competitive industries price are lower. Our next step is to see whether concentration and competition are related with annual fees. We do it in two different ways. First using OLS regression and then using instrumental variables. Using OLS, we add to the specifications of table 16, the indicators of competition and concentration in the industry like HHI, N/Pop, and New_Comp/Pop. None of the coefficients of these indicators is statistically significant at standard levels. Therefore we do not find any relation between market structure and fees. Then, we add as independent variables the indicators related with fund proliferation. Results are shown on columns (10) and (11) of table 16. The coefficients of the variables New_funds/N and the Nf/N are negatively related with annual fees and are statistically significant. Therefore more fund competition and contestability is negatively related with the level of fees. We then use two stage least squares to analyze how concentration and competition affects fees. On the first stage we regress annual fees on the instruments. On the second stage, we add at turn the competition and concentration indicators. Note that in this specification, we are testing whether the exogenous component of concentration and contestability has any power explaining industry fees. Results (not reported for sake of brevity) show that neither the exogenous component of concentration or competition seems related to fees, as none of the coefficients is statistically significant at standard levels.

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Overall, with the exception of fund competition and contestability market structure does not seem to affect the global level of fees.

6. DOES COMPETITION AFFECTS CONCENTRATION?

The analysis of industry competition in an industry usually goes hand-in-hand with the analysis of concentration. The basic economic contention is that concentration intensifies market power and thereby limits competition. In this section we analyze the relation between the two variables in the mutual fund industry. As a first attempt to understand their relation, we do a standard OLS regression where we add as independent variables the proxies of the market structure. More specifically, like in the regressions of table 13, we also test the number of portfolio managers companies per capita and the number of new firms per capita as independent variable. The values of the coefficients are presented on table 17. The other variables coefficients are omitted for simplicity reasons. The coefficients of contestability indicators are negative but not statistically significant. Therefore, we cannot conclude that competition has a linear relation with concentration in the mutual fund industry. We then test the opposite, whether concentration affects competition adding the variable HHI as an independent variable on the regressions of table 14. In Panel B of table 17, we see that the coefficient is negative indicating that concentrations affects negatively competition but it is not statistically significant. Again, concentration also does not seem to affect competition. Finally, we analyse the launch on new funds or fund proliferation. Following regression on table 15, we add as independent variables competition and concentration indicators. Panel C of table 17 reports that more firms competing and more new firms per capita are positively related with fund proliferation. Therefore the larger the industry competition the larger the proliferation of funds. A concern on the previous analysis is that we have considered in section 5, competition and concentration indicators as endogenous variables, while we have treat them on table 17 as exogenous ones. To circumvent this issue, we make a different type of analysis using instrumental variables. In a first step, we regress competition and concentration indicators on the instrumental variables. On a second stage, the goal is to test whether besides instruments, i.e. the exogenous component of concentration and competition, affects each other. The results show that exogenous component of competition does not affect concentration, and that the exogenous component of concentration does not affect competition (tables are not report for sake of brevity).

The result is prevalent in all classes of funds we analyze and also in the fees of competitive styles we select on Table 9.

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Overall, the results indicate that we cannot find the stylized fact that concentration in the mutual fund industry intensifies market power and thereby limits competition, similarly to the findings in Demirg-Kunt and Levine (2000) and Jansen and Haan (2003) for the banking industry. In fact, the mutual fund industry presents some specificity where higher levels of competition might intensify industry concentration. Specifically large families have some potential advantages that can make them strengthen their market share increasing industry concentration. Namely some factors are: Due to economies of scale and scope (e.g. Baumol, Goldfeld, Gordon, and Koehn (1990), Collins and Mack (1997), Latzko (1999), Ang and Lin (2001) and Chen, Huang, Hong and Kubik (2004)) large families can economize some fixed costs which can be reflected in lower fees or enhance net performance of funds. Both actions are likely to be effective strategies in increasing market share13. Nevertheless, a competitive environment is important for passing these economies to investors. Distortions caused by performance spillover. Star performance generates a substantial amount of inflows not only for the fund but also for the family (Nanda, Zheng and Wang (2004)). Fund families have high incentives to launch new funds and to transfer means to create high value funds. Larger fund firms are the ones more likely to do it as they have more means and experience to generate funds, reinforcing market share in that way. Evidence for the U.S. finds that families that perform better, and start more funds relative to the competition (a measure of innovation) have a larger market share (Khorana and Servaes (2007)). Also, our results suggest that fund proliferation is related with more firm competition. Advertising Spillovers. Larger firms have more means to spend on advertising. Huij and Verbeek (2007) find that funds with high marketing expenses generate spillovers and enhance cash inflows to family members with low marketing expenses.

7. ROBUSTNESS
We repeat the analysis of Tables 13 and 14 using concentration and competition indicators based on computations on mutual fund administrator companies. This allows seeing the robustness of the results to changes in the sample of countries and at the same time to detect important changes between administrator and portfolio management companies.

On the other hand the evidence on economies of scale is limited. Latzko (2001) find that investment management and distribution expenses both tend to be subject to diseconomies of scale. He found few families exhibiting scale economies on average. The reliable sources of scale economies are some of the other administrative expenses, but these make up a small portion of total costs. Edelen, Evans and Kadlec (2007) advocate that large funds suffer from desiconomies of sclae like trading costs. Many empirical papers find a negative relation between fund size and fund

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Table 18 shows that results are qualitatively confirmed. As in table 13, common law countries and countries where financial markets are more active have less industry concentration. In this case, countries with better quality of institutions and more economic freedom have less industry concentration at administrator company level. Results are also robust to several controls like variables GDP, industry age and INTERNET. Results for constestability in the mutual fund industry are also confirmed using data on administrator companies. Panel A of table 19 confirms the importance of the quality of institutions on the number of administrator firms competing. The variable TURNOVER is also negatively related with the number of administrator firms competing similar to previous results. Concerning regulation, the variable CUSTODIAN is statistically significant at standard levels of significance. On Panel B, the quality of institutions is positively related with the entry of new administrator firms, but this time common law dummy is negatively related with firm entry, a results sensitive to departure of U.S. from the sample. Concerning the variables related with regulation, the variable RESTRICT has a negative effect on the entry of new administrator firms. We also interact the variable bank concentration with bank restrictions and as before has a negative effect on the entry of new administrator firms in the industry. (insert table 18 and 19)

8. CONCLUSION
The classical competitive market structure is characterised by a high a number of firms competing, firm entry lower market shares and low prices. We unveiled several new results in the mutual fund industry that challenge the stylized ideas about the classical relation between competition and concentration in an industry. One of similarities in the industry worldwide lies on the organisation of the mutual fund industry where there is concentration of administrative tasks while portfolio management structure is more fragmented. The mutual fund industry is concentrated worldwide and large fund complexes are present in countries such as Australia, Austria, Canada, Germany, the U.K. and the U.S. suggesting a more strong and developed mutual fund industry in those countries. The results indicate that countries with common law and higher stock market turnover are associated with low levels of industry concentration. Fees differ substantially around the world even within asset classes and similar styles. Fees tend to be higher in industries with low stock market turnover, and where industry size is smaller, which corroborates validates the hypothesis of economies of scale on the industry. Fees are higher in countries where foreign mutual fund companies have a larger market share.

performance (Chen, Hong, Huang and Kubik (2004), Indro, Jiang, Hu and Lee (1999), Dalquist, Engstrom and Soderlin (2000)).

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Fund proliferation seems to be also an important aspect of the competition in the industry. The rapid growing of mutual funds described by Gruber (1996) has been interpreted as a competitive strategy to limit competition and increase market coverage of fund families (Massa (1998, 2003)). Our results show that fund proliferation is negatively associated with the level of mutual fund fees and positively with firm competition. Concerning the relation between competition and concentration there is a lot of heterogeneity challenging the classical economic relation between them. The results show highly concentrated industries, with few entries of firms, but low fees like Belgium, but also document countries with low concentration, high number of firms competing but charging higher fees. We also find countries like the U.S., the Netherlands and China with low concentration and low fees, and high concentration and high fees like Poland. Overall, the mutual fund industry shows several national singularities. Nevertheless, our evidence validates the contention that the degree of competition is important for the variety of products, as we find more fund offer in more competitive industries.

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Nanda Vikram, Wang Z. Jay, and Lu Zheng, 2005, The ABCs of Mutual Funds: On the Introduction of Multiple Share Classes, Working paper. Navone, Marco, 2003, Mutual fund competition with misspecified investment objectives, Bocconi University Working paper O'Neal E. S., 2004, Purchase and redemption patterns of U.S. equity mutual funds, Financial Management, Vol. 33 (1) , 63-90. Otten, R. and M. Schweitzer, 2002, A comparison between the European and the USA mutual fund industry, Managerial Finance, Vol. 28, 14-35. Ramos, Sofia B., 2009, The size and structure of the world mutual fund industry, European Financial Management, vol.15 (1), 145-180. Sirri, ER and Peter Tufano, 1998, Costly search and mutual fund flows, Journal of Finance, Vol. 53 (5), 1589-1622 Spitz, Edward, 1970, Mutual Fund Performance and Cash Inflows, Applied Economics, vol. 2(2), 141-45. Stein, J., 2002, Information production and capital allocation: Decentralized versus hierarchical firms, Journal of Finance 57, 18911921 Teo, Melvyn and Sung-Jun Woo, 2004, Style effects in the cross-section of stock returns, Journal of Financial Economics 74, 367398 Wilcox, R.T., 2003, Bargain hunting or star gazing? Investors' preferences for stock mutual funds, Journal of Business, Vol. 76 (4), 645-663 Zingales, L., 2004, The costs and benefits of Financial Market Regulation, Law Working Paper n21/2004, European Corporate Governance Institute.

31

Tables and Graphs Graph 1- Concentration in the Mutual fund Industry

The table depicts countries using two concentration measures: market share of five largest companies (CR5), market share of ten largest companies (CR10) and Herfindahl-Hirschman Index (HHI).

80.00%

Port ugal

Belgium

Norway
Poland Finland

Thailand Sweden Net herlands 60.00%

Japan

CR5

Denmark Indonesia Aust ria Spain Swit zerland Malaysia

Germany India It aly Singapure

Australia 40.00% USA

Taiwan Canada China France Korea

UK 20.00% 0.000

0.050

0.1 00

0.1 50

0.200

0.250

HI

Graph 2 - Concentration in the Mutual Fund Industry: Bond and Equity Funds
The table depicts countries using the Herfindahl-Hirschman index (HHI) for bond and equity funds.

Indonesia

Equit Funds (Hi)

Port ugal Malaysia Swit zerland Poland Thailand Finland Singapure Belgium

Norway Sweden
Net herlands Germany Korea Japan Spain Denmark China

USA UK 0.000 0.000 0.050

India Aust ria Taiwan It aly Australia Canada France

0.1 00

0.1 50

0.200

0.250

0.300

0.350

Bond Funds (HI)

Table 1: Mutual Fund Industry: Industry Size and Number of Funds

This table presents the total net asset values of open end funds and the number of funds by country (Nf). Last rows present the total, average, standard deviation, maximum and minimum. Data is from Lipper Hindsight year 2006.
Countries Australia Austria Belgium Canada China Denmark Finland France Germany India Indonesia Italy Japan Korea Malaysia Netherlands Norway Poland Portugal Singapore Spain Sweden Switzerland Taiwan Thailand U.K. U.S. Total Average St. Dev. Maximum Minimum Industry Value USD million 343,109 115,985 119,165 365,540 112,727 80,399 77,546 1,272,098 450,159 70,819 5,377 451,500 485,815 216,799 16,658 134,297 49,480 28,733 40,052 39,299 357,216 177,035 212,999 65,787 25,699 1,008,758 10,096,586 16,419,636 608,135 1,919,779 10,096,586 5,377 Number Funds (Nf) 5,617 1,968 995 2,013 313 423 456 5,153 1,349 899 350 1,018 2,783 7,683 518 373 351 157 267 589 2,808 503 815 519 721 2,659 8,448 49,748 1,843 2,282 8,448 157

Table 2: Determinants of Mutual Fund Industry Competition and Concentration

This table presents explanatory variables by country. The variables are: KKZ_Composite Index (KKZ_INDEX) is an index constructed by Kaufman et al. (1999) to measure institutional development. COMMON is common law dummy variable. TURNOVER is stock market turnover from the World Development Indicators. ECON_FREEDOM is the index of economic freedom provided by the Heritage Foundation. BANK_RESTRICT is a variable and is a summary index of overall regulatory restrictiveness is from Barth, Caprio and Levine (2001). It takes the values between 1 (least restrictive) and 4 (most restrictive). CUSTODIAN is a dummy variable that takes the value of one if custodians companies are required to be independent of the mutual fund family and data is from KPMG. BANKCONC the market share of the five largest banks from Beck, Demirg-Kunt and Levine (2000). GDP is the GDP per capita from the World Development Indicators. IND_AGE is the the year the industry started in a country from Khorana, Servaes and Tufano (2005). INTERNET is the number of internet users per 1000 people from the World Development Indicators. Last rows present descriptive statistics: average, mean and standard deviation CUSTODIAN KKZ-INDEX COMMON TURNOVER ECON_FREEDOM BANK-RESTRICT BANKCONC GDP IND_AGE INTERNET Australia Austria Belgium Canada China Denmark Finland France Germany India Indonesia Italy Japan Korea Malaysia Netherlands Norway Poland Portugal Singapore Spain Sweden Switzerland Taiwan Thailand U.K. U.S. Descriptive Statistics Mean Median Standard Deviation 1.08 1.35 0.75 0.30 0.00 0.47 90.25 79.14 49.30 68.39 68.42 8.96 2.21 2.30 0.67 0.63 0.62 0.23 24,209 28,637 10,582 40.37 42.00 22.87 26.39 27.91 13.24 1.64 1.58 1.38 1.63 -0.49 1.83 1.92 1.15 1.42 -0.26 -0.74 0.72 1.13 0.61 0.38 1.69 1.74 0.54 1.14 1.62 1.12 1.73 1.81 0.90 0.03 1.56 1.35 1 0 0 1 0 0 0 0 0 1 0 0 0 0 1 0 0 0 0 1 0 0 0 0 1 1 1 59.84 43.39 42.87 63.69 65.82 77.52 80.76 133.51 99.50 51.32 92.65 66.09 220.10 38.12 108.37 83.45 48.68 56.29 51.09 160.06 92.46 88.36 225.35 77.15 84.27 135.86 78.0 68.4 69.6 74.9 51.4 75.3 74.2 61.3 70.0 52.3 51.7 64.5 65.7 66.2 58.9 74.1 66.4 61.0 64.6 89.0 68.0 72.6 78.2 69.3 63.8 78.6 78.6 2.00 1.30 2.30 1.80 3.50 2.00 1.80 1.50 1.30 2.50 3.50 2.50 3.30 2.30 2.50 1.50 2.50 2.30 2.00 1.80 2.30 1.30 3.00 2.30 1.30 3.00 1 NA 0 0 NA NA 1 1 1 1 NA 1 NA NA 1 0 0 1 1 1 1 0 1 1 NA 1 0 0.64 0.70 0.96 0.54 0.62 0.79 0.98 0.59 0.67 0.34 0.58 0.29 0.32 0.46 0.42 0.71 0.94 0.43 0.85 0.99 0.64 0.96 0.88 0.27 0.50 0.50 0.37 30,448 31,265 30,509 31,184 5,559 32,106 28,949 28,637 28,654 3,072 3,419 27,692 29,392 19,019 9,573 29,323 39,843 12,008 17,859 27,316 23,242 28,371 33,636 25,168 8,176 29,483 39,732 41 50 59 74 5 44 19 42 57 42 10 23 41 14 47 77 13 14 20 47 48 48 68 22 11 72 82 35.06 28.47 22.57 35.69 31.67 35.50 19.41 24.19 1.26 2.02 22.02 30.00 34.38 20.23 38.49 29.67 11.57 15.64 32.76 14.41 43.87 27.35 58.41 4.78 26.20 40.55

Table 3: Mutual Fund Industry Competition Indicators

This table presents competition measures for administrator companies (Panel A) and portfolio management companies (Panel B). Measures are the number of firms competing (N), the number of management companies per million inhabitants (N/Pop), market share of foreign firms in a country (Foreign_mf_sh). Last rows present descriptive statistics: average, standard deviation, maximum and minimum. NA means not available.
Panel A: Administrator Companies N Australia Austria Belgium Canada China Denmark Finland France Germany India Indonesia Italy Japan Korea Malaysia Netherlands Norway Poland Portugal Singapore Spain Sweden Switzerland Taiwan Thailand U.K. U.S. Average St. Dev. Maximum Minimum 121 55 16 96 53 23 24 268 137 31 17 56 68 28 48 37 20 14 18 41 108 46 52 46 18 196 NA 63 61 268 14 N/Pop 6.01 6.78 1.54 3.01 0.04 4.26 4.60 4.47 1.66 0.03 0.08 0.97 0.53 0.58 1.90 2.28 4.36 0.37 1.72 9.46 2.62 5.12 7.04 2.06 0.29 3.30 NA 2.89 2.52 9.46 0.03 Panel B: Portfolio Management Companies N 190 174 44 155 50 40 62 297 192 31 69 78 68 49 56 51 28 20 18 48 115 48 136 46 19 429 667 118 145 667 18 N/Pop 9.44 21.44 4.23 4.86 0.04 7.41 11.89 4.95 2.32 0.03 0.32 1.35 0.53 1.02 2.22 3.14 6.11 0.52 1.72 11.07 2.79 5.34 18.42 2.06 0.30 7.22 2.27 4.93 5.48 21.44 0.03 Foreign_mf_sh 0.32 0.38 0.04 0.15 0.12 0.15 0.42 0.16 0.19 0.44 0.53 0.25 0.19 0.12 0.14 0.13 0.16 0.74 0.22 0.64 0.08 0.07 0.06 0.28 0.24 0.44 0.08 0.25 0.18 0.74 0.04

Table 4: Entry of New Companies in the Mutual Fund Industry

This table presents competition measures for administrator companies (Panel A) and portfolio management companies (Panel B). Measures are the yearly average of new companies between 2003-2006 (New_ comp), the average number of new management companies per inhabitants (New_comp/Pop), the average number of new companies to the total number of companies (New_comp/N). Last rows present descriptive statistics: average, standard deviation, maximum and minimum. NA stands for not available.
Panel A: Administrator Companies New_comp Australia Austria Belgium Canada China Denmark Finland France Germany India Indonesia Italy Japan Korea Malaysia Netherlands Norway Poland Portugal Singapore Spain Sweden Switzerland Taiwan Thailand U.K. U.S. Average St. Dev. Maximum Minimum 16.75 3.25 0.00 5.75 9.00 2.00 2.00 10.00 5.50 1.50 1.25 3.25 2.25 0.50 2.75 2.25 0.50 0.50 0.75 3.00 3.25 3.33 1.75 2.00 0.75 5.75 NA 3.45 3.69 16.75 0.00 New_comp/Pop 0.83 0.40 0.00 0.18 0.01 0.37 0.38 0.17 0.07 0.00 0.01 0.06 0.02 0.01 0.11 0.14 0.11 0.01 0.07 0.69 0.08 0.37 0.24 0.09 0.01 0.10 NA 0.17 0.22 0.83 0.00 New_comp/N 0.14 0.06 0.00 0.06 0.17 0.09 0.08 0.04 0.04 0.05 0.07 0.06 0.03 0.02 0.06 0.06 0.03 0.04 0.04 0.07 0.03 0.07 0.03 0.04 0.04 0.03 NA 0.06 0.04 0.17 0.00 Panel B: Portfolio ManagementCompanies New_comp 26.0 12.0 1.3 7.5 11.5 3.5 4.3 11.8 15.0 10.0 1.3 3.5 2.0 2.5 4.0 2.5 0.5 1.3 0.8 3.3 2.8 2.5 11.8 2.0 1.0 25.5 27.0 7.29 8.00 27.00 0.50 New_comp/Pop 1.29 1.48 0.12 0.24 0.01 0.65 0.81 0.20 0.18 0.01 0.01 0.06 0.02 0.05 0.16 0.15 0.11 0.03 0.07 0.75 0.07 0.28 1.59 0.09 0.02 0.43 0.09 0.33 0.46 1.59 0.01 New_comp/N 0.14 0.07 0.03 0.05 0.23 0.09 0.07 0.04 0.08 0.32 0.02 0.04 0.03 0.05 0.07 0.05 0.02 0.06 0.04 0.07 0.02 0.05 0.09 0.04 0.05 0.06 0.04 0.07 0.07 0.32 0.02

Table 5: Bond and Equity Mutual Fund Companies

This table presents competition measures for administrator companies (Panel A) and portfolio management companies (Panel B). Measures are: the number of firms competing (N), Number of management companies per million inhabitants (N/Pop). Last rows present descriptive statistics: average, standard deviation, maximum and minimum.

Panel A: Bond Funds N Australia Austria Belgium Canada China Denmark Finland France Germany India Indonesia Italy Japan Korea Malaysia Netherlands Norway Poland Portugal Singapore Spain Sweden Switzerland Taiwan Thailand U.K. U.S. Average St. Dev. Maximum Minimum 47 76 23 51 17 28 23 134 67 27 54 55 53 46 33 25 14 17 12 23 77 20 43 28 17 102 257 51 50 257 12 N/Pop 2.34 9.37 2.21 1.60 0.01 5.19 4.41 2.23 0.81 0.12 0.05 0.96 0.41 0.96 1.31 1.54 3.06 0.45 1.15 5.31 1.87 2.23 5.82 1.25 0.27 1.72 0.88 2.13 2.17 9.37 0.01

Panel B: Equity Funds N 148 109 35 130 20 34 55 232 121 30 25 54 63 46 51 38 26 18 14 35 93 43 86 39 18 344 580 92 122 580 14 N/Pop 7.36 13.43 3.36 4.07 0.02 6.30 10.55 3.87 1.46 0.14 0.02 0.94 0.49 0.96 2.02 2.34 5.67 0.47 1.34 8.07 2.25 4.79 11.65 1.74 0.29 5.79 1.98 3.75 3.75 13.43 0.02

Table 6: Style Variety in the Mutual Fund Industry

This table presents the number of different styles of mutual funds based on Lipper Global Style Classification.
All Funds Australia Austria Belgium Canada China Denmark Finland France Germany India Indonesia Italy Japan Korea Malaysia Netherlands Norway Poland Portugal Singapore Spain Sweden Switzerland Taiwan Thailand U.K. U.S. Average 53 91 74 59 9 57 82 118 93 21 9 78 79 37 33 66 40 25 43 68 73 44 99 39 21 88 48 57 Equity Funds 11 29 17 6 1 16 21 27 24 3 2 25 21 5 3 16 6 8 11 11 21 6 25 5 3 18 10 13 Bond Funds 24 34 35 32 1 31 38 55 43 13 1 28 35 17 19 28 24 7 15 44 30 28 45 22 8 42 22 27

Table 7: Competing Funds and Entry of New Funds in the Mutual Fund Industry
This table presents the following indicators: Average of new funds per million inhabitants (Nf/Pop), Average number of new funds to the total number of funds (New_Funds/Nf ), Average number of new funds per million inhabitants (New_Funds/Pop). Measures for administrator companies (Panel A) and portfolio management companies (Panel B). Average number of funds per company (Nf/N), Average number of new funds per management company (New_funds/N), Average number of funds owned by the 5 largest portfolio management companies (Nf_CR5). Population is in millions. Last rows present descriptive statistics: average, standard deviation, maximum and minimum. NA means not available.
Nf/Pop Australia Austria Belgium Canada China Denmark Finland France Germany India Indonesia Italy Japan Korea Malaysia Netherlands Norway Poland Portugal Singapore Spain Sweden Switzerland Taiwan Thailand U.K. U.S. Average St. Dev. Maximum Minimum 279.17 242.51 95.63 63.10 0.24 78.38 87.44 85.90 16.33 0.83 1.61 17.68 21.78 159.59 20.55 22.95 76.60 4.11 25.58 135.87 68.01 55.98 110.40 23.20 11.56 44.76 28.78 65.87 70.66 279.17 0.24 Panel A: General indicators New_Funds/Nf 0.13 0.08 0.05 0.07 0.21 0.07 0.12 0.09 0.07 0.17 0.20 0.06 0.11 0.22 0.15 0.04 0.05 0.11 0.08 0.10 0.11 0.05 0.14 0.11 0.18 0.07 0.06 0.11 0.05 0.22 0.04 New_funds/Pop 37.30 18.88 4.69 4.47 0.05 5.42 10.16 7.74 1.07 0.14 0.31 1.03 2.47 34.84 3.00 0.88 4.15 0.47 2.06 13.15 7.30 2.70 15.44 2.46 2.13 3.22 1.66 6.93 9.68 37.30 0.05 Panel B: Administrator Companies Nf/N New_funds /N 46.42 35.78 62.19 20.97 5.91 18.39 19.00 19.23 9.85 29.00 20.59 18.18 40.93 274.39 10.79 10.08 17.55 11.21 14.83 14.37 26.00 10.93 15.67 11.28 40.06 13.57 NA 31.43 51.33 274.39 5.91 6.20 2.79 3.05 1.48 1.23 1.27 2.21 1.73 0.65 4.83 4.01 1.06 4.63 59.91 1.58 0.39 0.95 1.29 1.19 1.39 2.79 0.53 2.19 1.20 7.38 0.98 NA 4.50 11.44 59.91 0.39 Nf/N 29.56 11.31 22.61 12.99 6.26 10.58 7.35 17.35 7.03 29.00 5.07 13.05 40.93 156.80 9.25 7.31 12.54 7.85 14.83 12.27 24.42 10.48 5.99 11.28 37.95 6.20 12.67 20.11 28.99 156.80 5.07 Panel C: Portfolio Management Companies Nf_CR5 New_Funds /N 451 160 159 179 13 32 33 142 91 54 18 59 210 390 27 27 37 11 30 47 204 41 51 20 44 66 148 101.59 111.23 450.60 10.80 3.95 0.88 1.11 0.92 1.31 0.73 0.85 1.56 0.46 4.83 0.99 0.76 4.63 34.23 1.35 0.28 0.68 0.90 1.19 1.19 2.62 0.51 0.84 1.20 6.99 0.45 0.73 2.82 6.48 34.23 0.28

Table 8: Mutual Fund Industry Fees

This tables presents average annual fees and standard deviation for all funds and then for asset types by country. Values in percentage.
All funds Bond Australia Austria Belgium Canada China Denmark Finland France Germany India Indonesia Italy Japan Korea Malaysia Netherlands Norway Poland Portugal Singapore Spain Sweden Switzerland Taiwan Thailand U.K. U.S. Average Annual fee 1.301 1.192 0.850 1.372 1.234 1.087 1.198 1.311 1.024 1.396 0.999 1.410 1.122 0.671 1.289 1.102 1.086 1.731 1.185 1.117 1.331 1.102 0.978 0.820 0.868 1.220 0.570 1.132 St. Dev. 0.660 0.565 0.468 1.077 0.440 0.597 0.726 0.712 0.487 0.426 0.658 0.548 0.465 0.983 0.446 0.791 0.752 1.144 0.618 0.688 0.593 0.603 0.589 0.510 0.522 0.509 0.353 0.627 Annual fee 1.03 0.85 0.48 0.99 0.58 0.79 0.62 0.84 0.68 0.95 1.24 0.97 0.90 1.02 0.82 0.79 0.38 1.58 0.89 0.84 1.09 0.58 0.57 0.43 0.51 0.88 0.46 0.806 St. Dev. 0.594 0.432 0.236 0.816 0.108 0.546 0.248 0.463 0.279 0.594 0.739 0.336 0.391 0.581 0.311 0.408 0.219 0.539 0.307 0.565 0.519 0.204 0.464 0.308 0.310 0.435 0.243 0.415 Equity Annual fee 1.41 1.56 1.01 1.52 1.19 1.27 1.48 1.57 1.19 1.09 1.55 1.84 1.31 1.73 1.51 1.10 1.41 2.16 1.84 1.24 1.80 1.23 1.06 1.04 1.26 1.27 0.67 1.382 St. Dev. 0.662 0.422 0.438 1.082 0.056 0.472 0.721 0.651 0.457 0.122 0.637 0.329 0.445 1.197 0.323 0.456 0.683 0.828 0.500 0.543 0.568 0.600 0.545 0.227 0.406 0.472 0.330 0.525 Asset Type Mixed Assets Annual fee 1.23 1.22 0.85 1.36 1.48 0.94 1.14 1.32 1.10 1.02 1.57 1.41 1.07 1.41 1.44 1.06 1.42 2.19 1.10 1.13 1.42 1.15 1.13 0.79 0.93 1.24 0.49 1.208 St. Dev. 0.609 0.559 0.377 1.084 0.101 0.749 0.601 0.665 0.493 0.119 0.622 0.476 0.416 0.705 0.219 0.501 0.421 0.955 0.576 0.420 0.599 0.503 0.413 0.235 0.649 0.439 0.325 0.512 Money Market Annual fee 0.86 0.63 0.39 0.62 0.33 0.68 0.39 0.52 0.49 0.76 1.46 0.54 0.33 0.54 0.61 0.65 0.31 0.93 0.84 0.54 0.90 0.49 0.40 0.24 0.41 0.56 0.24 0.581 St. Dev. 0.582 0.442 0.216 0.560 0.000 0.197 0.537 0.360 0.344 0.537 0.252 0.084 0.344 0.223 0.357 0.166 1.254 0.267 0.574 0.503 0.270 0.237 0.086 0.180 0.369 0.155 0.350

Table 9: Average Fee and Fee dispersion in the style category with the largest highest number of funds competing.
This table presents the average fee and the standard deviation of fee in the Lipper style category with the largest number of funds competing. Values in percentage.
Lipper Global Style Australia Austria Belgium Canada China Denmark Finland France Germany India Indonesia Italy Japan Korea Malaysia Netherlands Norway Poland Portugal Singapore Spain Sweden Switzerland Taiwan Thailand U.K. U.S. Equity Australasia Equity Global Protected Equity Canada Mixed Asset CNY Aggressive Bond DKK Equity Nordic Guaranteed Equity Global Bond INR General Bond Emerging Markets Other Equity Global Equity Japan Unclassified Equity Malaysia Equity Global Equity Nordic Equity Emerging Mkts Europe Guaranteed Protected Guaranteed Equity Sweden Bond CHF Equity Taiwan Bond THB Equity UK Equity North America Nf 1388 128 405 785 117 69 47 758 176 360 142 86 583 5029 161 46 83 27 29 64 832 119 75 126 215 369 1715 Average Annual Fee 1.379 1.524 0.235 1.370 1.496 0.614 1.581 1.631 1.354 1.208 1.723 1.822 1.187 0.336 1.525 1.075 1.529 3.706 0.863 1.228 1.219 1.178 0.525 1.524 0.630 1.283 0.587 St.dev. 0.651 0.435 0.437 1.074 0.033 0.483 0.498 0.711 0.322 0.199 0.742 0.409 0.454 0.847 0.382 0.526 0.687 0.624 0.501 1.320 0.391 0.491 0.383 0.195 0.295 0.446 0.312

Table 10: Fee Dispersion by style categories in the Mutual Fund Industry
This table presents the average fee and the standard deviation of fees in the Lipper style category with the largest number of funds competing (Nf). Panel A: Money Market Funds. Panel B: Bond Funds. Panel C: Equity Funds on the domestic market and Panel D: Equity Global. Values in percentage.
Domicile Australia Austria Belgium Canada China Denmark Finland France Germany India Indonesia Italy Japan Korea Malaysia Netherlands Norway Poland Portugal Singapore Spain Sweden Switerland Taiwan Thailand U.K. U.S. Average Panel A: Money Market Funds Lipper Global Style Money Market AUD Money Market EUR Money Market EUR Money Market CAD Money Market CNY Money Market EUR Money Market EUR Money Market EUR Money Market EUR Money Market INR Money Market Other Money Market EUR Money Market JPY Money Market KRW Money Market MYR Money Market EUR Money Market Other Money Market PLN Money Market EUR Money Market SGD Money Market EUR Money Market Other Money Market EUR Money Market Other Money Market THB Money Market GBP Money Market USD Nf 189 31 9 89 40 1 32 442 46 52 31 42 31 251 28 8 48 25 22 12 201 30 5 68 114 36 732 Average Annual Fee 0.841 0.519 0.314 0.612 0.330 0.680 0.403 0.682 0.518 1.068 1.675 0.524 0.316 0.544 0.608 0.568 0.322 1.754 0.803 0.485 0.822 0.492 0.554 0.256 0.524 0.560 0.237 0.586 St.dev 0.582 0.382 0.206 0.548 0.000 0.199 0.592 0.365 0.344 0.537 0.232 0.057 0.344 0.203 0.348 0.166 1.271 0.253 0.610 0.362 0.270 0.216 0.079 0.180 0.357 0.155 0.319 Panel B: Bond Funds Lipper Global Style Bond AUD Bond EUR Bond EUR Bond CAD Bond CNY Bond DKK Bond EUR Bond EUR Medium Term Bond EUR Bond INR General Bond Emerging Markets Other Bond Global Bond JPY Bond KRW Bond MYR Bond EuroZone Bond Europe Other Bond Emerging Markets Other Bond EUR Bond Global Bond EUR Short Term Bond SEK Bond CHF Bond Global Bond THB Bond GBP Corporates Bond USD Municipal Nf 353 61 20 233 18 69 9 96 79 360 142 58 176 770 76 21 39 24 19 30 168 37 75 26 215 107 1031 Average Annual Fee 0.987 0.632 0.467 0.905 0.568 0.614 0.489 0.979 0.678 1.208 1.723 1.028 0.685 1.029 0.860 0.778 0.379 1.994 0.862 1.038 0.895 0.552 0.525 1.006 0.630 0.992 0.465 0.857 St.dev 0.586 0.322 0.230 0.803 0.108 0.483 0.142 0.452 0.201 0.199 0.742 0.271 0.262 0.578 0.310 0.459 0.193 0.576 0.368 0.642 0.486 0.191 0.383 0.189 0.295 0.338 0.224 0.360

Table 10: Fee proliferation by style categories (cont.)

Panel C: Equity Domestic Lipper Global Style Australia Austria Belgium Canada China Denmark Finland France Germany India Indonesia Italy Japan Korea Malaysia Netherlands Norway Poland Portugal Singapore Spain Sweden Switerland Taiwan Thailand U.K. U.S. Average Equity Australasia Equity Europe Equity Europe Equity Canada Equity China Equity Nordic Equity Nordic Equity France Equity Germany Equity India Equity Indonesia Equity Italy Equity Japan Equity Korea Equity Malaysia Equity Netherlands Equity Nordic Equity Emerging Mkts Europe Equity Portugal Equity Singapore Equity Spain Equity Sweden Equity Switzerland Equity Taiwan Equity Thailand Equity UK Equity North America

Nf 1388 39 27 785 20 37 47 250 57 233 32 45 583 593 161 30 83 27 20 18 120 119 69 126 150 369 1715

Average Annual Fee 1.379 1.536 0.959 1.370 1.488 1.277 1.581 1.581 1.143 1.226 1.883 1.822 1.187 2.009 1.525 0.931 1.529 3.706 1.790 1.160 1.759 1.178 0.951 1.524 1.308 1.283 0.587 1.516

St.dev 0.651 0.288 0.425 1.074 0.056 0.592 0.498 0.721 0.392 0.122 0.637 0.201 0.454 1.141 0.382 0.383 0.687 0.624 0.471 0.369 0.597 0.491 0.509 0.195 0.384 0.446 0.312 0.478

Panel D: Equity Global Lipper Global Style Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global Equity Global ex U.S. Average

Nf 1029 128 44 414 54 42 245 176

Average Annual Fee 1.502 1.524 1.004 1.621 1.356 1.147 1.487 1.354 1.250 1.822 1.434 1.050 1.692 1.075 1.285 3.500 1.814 1.352 1.809 1.063 1.129 1.593 0.966 1.344 0.714 1.478

St.dev 0.702 0.435 0.484 1.144 0.562 0.591 0.611 0.322 0.409 0.383 0.998 0.138 0.526 0.778 0.707 0.551 0.551 0.567 0.636 0.532 0.267 0.630 0.515 0.277 0.529

86 78 35 13 46 53 2 7 63 92 75 65 15 9 242 355

Table 11: Concentration Indicators of Mutual Fund Industry

This table displays data on administrator (Panel A) and portfolio management mutual fund companies (Panel B) by countries. By column: total number of management companies (N), average market share (Av_mk_sh), market share of five largest companies (CR5), market share of ten largest companies (CR10) and Herfindahl-Hirschman index (HHI). Last rows present descriptive statistics: average, standard deviation, maximum and minimum. NA means not available.
Panel A: Administrator Companies Countries Australia Austria Belgium Canada China Denmark Finland France Germany India Indonesia Italy Japan Korea Malaysia Netherlands Norway Poland Portugal Singapore Spain Sweden Switzerland Taiwan Thailand U.K. U.S. Average St. Devi Maximum Minimum Total 121 55 16 96 53 23 24 268 137 31 17 56 68 28 48 37 20 14 18 41 108 46 52 46 18 196 NA 63 61 268 14 Av_mk_sh 0.83% 1.82% 6.25% 1.04% 1.89% 4.35% 4.17% 0.37% 0.73% 3.23% 5.88% 1.79% 1.47% 3.57% 2.08% 2.70% 5.00% 7.14% 5.56% 2.44% 0.93% 2.17% 1.92% 2.17% 5.56% 0.51% NA 2.91% 1.98% 7.14% 0.37% CR5 36.22% 61.95% 87.22% 45.33% 38.85% 76.52% 80.57% 48.15% 51.95% 49.89% 84.66% 50.04% 59.71% 60.74% 56.17% 74.93% 74.83% 82.82% 80.99% 45.09% 56.17% 65.07% 70.33% 31.65% 68.25% 34.63% NA 60.49% 16.71% 87.22% 31.65% CR10 52.46% 76.95% 98.06% 67.93% 57.04% 95.44% 92.20% 64.62% 68.03% 71.65% 97.51% 69.92% 74.75% 88.74% 75.31% 89.53% 95.30% 96.23% 94.52% 68.26% 72.73% 86.34% 83.98% 55.53% 88.39% 49.68% NA 78.12% 15.07% 98.06% 49.68% HHI 0.043 0.111 0.214 0.063 0.046 0.170 0.191 0.066 0.071 0.068 0.298 0.069 0.085 0.103 0.111 0.128 0.141 0.219 0.141 0.062 0.103 0.121 0.142 0.041 0.111 0.040 NA 0.114 0.064 0.298 0.040 Total 190 174 44 155 53 40 62 297 192 31 69 78 68 49 56 51 28 20 18 48 115 48 136 46 19 429 667 118 145 667 18 Panel B: Portfolio ManagementCompanies Av_mk_sh 0.53% 0.57% 2.27% 0.65% 1.89% 2.50% 1.61% 0.34% 0.52% 3.23% 1.45% 1.28% 1.47% 2.04% 1.79% 1.96% 3.57% 5.00% 5.56% 2.08% 0.87% 2.08% 0.74% 2.17% 5.26% 0.23% 0.15% 1.92% 1.50% 5.56% 0.15% CR5 44.36% 56.45% 80.33% 39.66% 38.85% 58.21% 68.49% 37.88% 52.03% 49.89% 53.31% 49.40% 59.71% 37.70% 55.99% 65.15% 71.35% 68.61% 80.99% 46.68% 56.21% 64.90% 56.13% 31.65% 65.59% 25.94% 35.22% 53.73% 14.39% 80.99% 25.94% CR10 62.06% 69.70% 92.36% 58.50% 57.04% 84.10% 80.33% 53.58% 67.49% 71.65% 74.15% 67.07% 74.75% 60.09% 75.20% 84.24% 89.85% 86.64% 94.52% 69.02% 72.75% 85.85% 67.82% 55.53% 85.73% 40.59% 45.29% 71.33% 14.20% 94.52% 40.59% HHI 0.066 0.087 0.208 0.051 0.046 0.090 0.135 0.047 0.070 0.068 0.094 0.067 0.085 0.046 0.110 0.109 0.133 0.127 0.141 0.066 0.103 0.120 0.091 0.041 0.103 0.023 0.015 0.087 0.042 0.208 0.015

Table 12: Mutual Fund Industry: Concentration Indicators for Bond and Equity funds
This table displays summary statistics (average, standard deviation, maximum and minimum) on administrator (Panel A) and portfolio management mutual fund companies (Panel B) for Bond and Equity Funds. By column: total number of management companies (N), average market share (Av_mk_sh), market share of five largest companies (CR5), market share of ten largest companies (CR10) and Herfindahl-Hirschman index (HHI).
Bond Funds Countries Average St. Dev. Maximum Minimum Panel A: Administrator Companies Total Av_mk_sh CR5 34 4.40% 70.91% 26 2.51% 15.77% 121 9.09% 97.08% 11 0.83% 45.22% Panel A: Administrator Companies Average St. Dev. Maximum Minimum Total 48 46 202 10 Av_mk_sh 3.73% 2.58% 10.00% 0.50% CR5 65.80% 16.28% 99.50% 37.26% CR10 82.97% 13.46% 100.00% 50.52% HHI 0.151 0.147 0.828 0.043 CR10 87.45% 11.08% 99.88% 65.44% HHI 0.156 0.091 0.462 0.019 Equity funds Panel B: Portfolio ManagementCompanies Total 92 122 580 14 Av_mk_sh 2.45% 1.80% 7.14% 0.17% CR5 58.77% 15.40% 90.23% 26.73% CR10 76.73% 14.62% 98.29% 41.42% HHI 0.105 0.054 0.261 0.025 Panel B: Portfolio ManagementCompanies Total Av_mk_sh CR5 51 3.30% 65.37% 50 2.06% 16.34% 257 8.33% 96.00% 12 0.39% 37.86% CR10 82.71% 12.87% 99.71% 52.44% HHI 0.128 0.063 0.248 0.041

Table 13: Mutual Fund Industry Concentration

This table reports the results of an OLS regression where the dependent variables is the Herfindahl-Hirschman Index calculated with Portfolio Management Companies. All regressions are run with an intercept. Columns present the coefficients and below the significance of the coefficients. Explanatory variables are described on table 2. Statistical significant coefficients are at bold.

(1) Intercept 0.149 (0.000) KKZ_INDEX -0.003 (0.739) COMMON -0.048 (0.002) TURNOVER -0.474 (0.001) ECON_FREEDOM

(2) 0.190 (0.022) 0.005 (0.790) -0.043 (0.017) -0.452 (0.002) -0.001 (0.598)

(3) 0.139 (0.003) -0.002 (0.854) -0.046 (0.004) -0.471 (0.001)

(4) 0.181 (0.000)

(5) 0.098 (0.000)

(6) 0.163 (0.000)

(7) 0.155 (0.000)

(8) 0.151 (0.000)

-0.064 (0.001) -0.001 (0.001)

-0.037 (0.011) -0.363 (0.002)

-0.050 (0.001) -0.464 (0.001)

-0.043 (0.009) -0.470 (0.001)

-0.047 (0.002) -0.437 (0.002)

BANK_RESTRICT

0.004 (0.791)

CUSTODIAN

-0.018 (0.244)

BANKCONC

0.056 (0.035)

GDP

-0.001 (0.261)

IND_AGE

0.000 (0.400)

INTERNET

0.000 (0.460)

Adjusted R

0.401 26

0.378 26

0.363 25

0.579 20

0.482 26

0.430 26

0.417 26

0.407 26

Observations

Table 14: Mutual Fund Industry Firm Entry

This table reports the results of an OLS regression where the dependent variables is the number of Portfolio Management Companies per capita (Panel A) and the number of new portfolio management companies per capita (Panel B). All regressions are run with a constant. Columns present the coefficients and below the significance of the coefficients. Explanatory variables are described on table 2. Statistical significant coefficients are at bold.
Panel A: Portfolio Manager Companies per capita (N/Pop) (1) Intercept 2.377 (0.324) KKZ_INDEX 4.693 (0.000) COMMON -0.218 (0.890) TURNOVER -0.028 (0.093) ECON_FREEDOM -0.030 (0.029) 0.126 (0.366) BANK_RESTRICT -3.181 (0.092) CUSTODIAN -0.026 (0.100) -0.028 (0.066) 0.161 (0.270) -3.393 (0.070) -0.021 (0.080) 0.357 (0.000) -2.074 (0.219) 2.89 (0.048) BANKCONC 55.27 (0.009) GDP -0.121 (0.340) IND_AGE -0.035 (0.485) BANKCONC*BANK_RESTRICT -0.007 (0.882) -22.72 (0.019) Adjusted R
2

(2) -4.796 (0.591) 3.449 (0.079)

(3) 10.857 (0.057) 3.080 (0.003)

(4) 2.488 (0.823) 1.278 (0.489)

(5) 15.890 (0.016)

(6) 12.202 (0.042) 3.603 (0.051)

(7) 1.403 (0.443) 6.202 (0.004) 0.200 (0.923)

(8) -23.890 (0.003)

-0.026 (0.139) 0.047 (0.664) -3.366 (0.072) 8.361 (0.028)

0.354 26

0.367 26

0.445 25

0.437 25

0.542 19

0.431 25

0.283 27

0.546 26

Observations

Table 14: Mutual Fund Industry Firm Entry (cont. )

Panel B: New companies per capita (New_Comp/Pop) (1) Intercept 0.118 (0.539) KKZ_INDEX 0.354 (0.002) COMMON 0.071 (0.670) TURNOVER -0.002 (0.096) ECON_FREEDOM -0.003 (0.022) 0.022 (0.135) BANK_RESTRICT (2) -1.046 (0.224) 0.130 (0.422) -0.107 (0.494) -0.003 (0.037) 0.023 (0.006) -0.248 (0.085) BANKCONC -0.003 (0.043) 0.021 (0.011) -0.262 (0.087) -0.002 (0.110) 0.020 (0.035) -0.247 (0.133) 0.142 (0.696) CUSTODIAN 0.380 (0.022) GDP 0.003 (0.773) IND_AGE -0.005 (0.143) BANKCONC*BANK_RESTRICT -1.860 (0.053) Adjusted R2 Observations 0.255 26 0.306 26 0.376 25 0.394 25 0.367 25 0.468 19 0.366 25 0.400 25 0.420 26 -1.670 (0.068) 0.431 26 -0.002 (0.079) 0.033 (0.013) -0.118 (0.447) -0.003 (0.054) 0.019 (0.163) -0.258 (0.086) -0.003 (0.026) 0.026 (0.009) -0.303 (0.038) 0.785 (0.082) 4.860 (0.038) 0.007 (0.562) 0.712 (0.104) 4.360 (0.047) (3) -0.413 (0.557) (4) -0.323 (0.658) (5) -0.369 (0.631) (6) -0.181 (0.055) (7) -0.233 (0.809) (8) -0.369 (0.634) (9) -1.970 (0.067) 0.003 (0.983) (10) -2.190 (0.010)

Table 15: Fund Proliferation in the Mutual Fund Industry

This table reports the results of an OLS regression where the dependent variables is the number of new funds per Portfolio Management Companies (Panel A) and the number of new funds per portfolio management companies (Panel B). All regressions are run with a constant. Columns present the coefficients and below the significance of the coefficients. Explanatory variables are described on table 2. Statistical significant coefficients are at bold.

Panel A: New_Fund/N (1) (2) (3)

Panel B: NewFund/Pop (4) (5)

Intercept

3.698 (0.268)

-3.531 (0.049)

3.552 (0.489) 0.066 (0.213)

-3.088 (0.064) -0.047 (0.115) 0.528 (0.042)

-9.572 (0.388)

TURNOVER

ECON_FREEDOM

-0.048 (0.352)

0.577 (0.041) -0.896 (0.524)

0.511 (0.026) -0.436 (0.029)

BANK_ RESTRICT

CUSTODIAN

8.617 (0.028)

5.337 (0.055) -0.055 (0.423) 0.209 20 -0.108 (0.071) 0.275 25

6.426 (0.066) -0.205 (0.070) 0.267 20 0.174 26

AGE

0.008 (0.442)

Adjusted R

0.073 20

Observations

Table 16: Mutual Fund Industry Fees

This table reports the results of an OLS regression where the dependent variable is annual fees. All regressions are run with a constant. Columns present the coefficients and below the significance of the coefficients. Explanatory variables are described on table 2. Statistical significant coefficients are at bold.
(1) Intercept 1.161 (0.000) KKZ_INDEX 0.022 (0.732) TURNOVER -1.571 (0.097) ECON_FREEDOM -1.624 (0.076) -1.845 (0.053) -0.004 (0.261) BANK_RESTRICT -0.072 (0.325) CUSTODIAN 0.173 (0.115) AGE 0.000 (0.880) Foreign_mf_sh 0.420 (0.113) IND_SIZE -0.039 (0.095) EUROPE* Foreign_mf_sh 0.391 (0.109) -0.038 (0.091) 0.459 (0.070) 0.486 (0.068) -0.040 (0.000) 0.436 (0.093) -0.033 (0.165) -0.040 (0.100) -0.046 (0.082) 0.483 (0.070) -0.045 (0.000) 0.499 (0.037) New_Fund/N 0.224 (0.372) 0.157 (0.532) -0.038 (0.000) 0.496 (0.042) -0.009 (0.051) Nf/N -0.002 (0.070) Adjusted R
2

(2) 1.199 (0.000)

(3) 1.177 (0.000)

(3) 1.337 (0.000)

(4) 1.333 (0.000)

(5) 1.260 (0.000)

(6) 1.323 (0.000)

(7) 1.038 (0.000)

(8) 1.153 (0.000)

(9) 1.174 (0.000)

(10) 1.168 (0.000)

(11) 1.195 (0.000)

-1.550 (0.100)

-1.988 (0.078)

-1.998 (0.038)

-1.656 (0.048)

-1.438 (0.110)

-0.935 (0.417)

-1.056 (0.327)

0.388 (0.159) -0.044 (0.001)

0.369 (0.183) -0.043 (0.001)

0.302 26

0.330 26

0.268 26

0.247 27

0.327 25

0.372 20

0.246 26

0.251 27

0.349 26

0.417 26

0.351 26

0.341 26

Table 17: Relating Competition and Concentration in the mutual fund industry
This table reports the results of an OLS regression where the dependent variables are the Herfindahl-Hirschman Index calculated with Portfolio Management Companies (Panel A), the number of Portfolio Management Companies per capita (Panel B), the number of new portfolio management companies per million inhabitant (Panel B) and number of funds per Portfolio Management Companies (Panel C) and the number of new funds per portfolio management companies (Panel C) All regressions are run with a constant. Columns present the coefficients and below the significance of the coefficients. Other variables coefficients omitted. Statistical significant coefficients are at bold.
Panel A: Dependent Variable: HHI (1) N/Pop -0.001 (0.142) New_comp/Pop -0.017 (0.130) Adjusted R square Observations 0.430 26 0.435 26 (2)

Panel B: Dependent Variables N/Pop (1) HHI -20.126 (0.199) New_comp/Pop (2) -0.897 (0.621)

Adjusted R square Observations

0.375 26 Panel C: Dependent Variables New_Fund/N (1) (2) (3) (4) -3.618 (0.360) 0.025 (0.681)

0.370 26

New Fund /Pop (5) (6)

HHI

-1.728 (0.590)

N/Pop

0.637 (0.056) 1.103 (0.410) 1.102 (0.043) (0.161) 26 (0.217) 26 (0.327) 26

New_comp/Pop

Adjusted R

(0.015) 20

(0.017) 20

(0.118) 20

Observations

Table 18: Mutual Fund Industry Concentration- Robustness checks

This table reports the results of an OLS regression where the dependent variables is the Herfindahl-Hirschman Index of Administrator Companies. All regressions are run with an intercept. Columns present the coefficients and below the significance of the coefficients. Explanatory variables are described on table 2. Statistical significant coefficients are at bold.

(1) Intercept 0.247 (0.425) KKZ_INDEX -0.036 (0.003) COMMON -0.094 (0.021) TURNOVER -0.001 (0.000) ECON_FREEDOM

(2) 0.081 (0.407) -0.070 (0.003) -0.114 (0.009) -0.001 (0.038) 0.003 (0.090)

(3) 0.235 (0.010) -0.035 (0.148) -0.092 (0.000) -0.001 (0.000)

(4) 0.239 (0.000) -0.016 (0.325) -0.091 (0.000) -0.001 (0.000)

(5) 0.162 (0.001) -0.063 (0.000) -0.079 (0.000) -0.001 (0.002)

(6) 0.282 (0.000)

(7) 0.234 (0.000)

(8) 0.225 (0.005)

(9) 0.352 (0.001)

(10) 0.170 (0.075)

-0.103 (0.000) -0.001 (0.000)

-0.075 (0.000) -0.001 (0.000)

-0.086 (0.001) -0.001 (0.010)

-0.054 (0.011) 0.000 (0.084) -0.004 (0.039)

-0.117 (0.003) -0.001 (0.000) 0.002 (0.282)

BANK_RESTRICT

0.004 (0.894)

CUSTODIAN

-0.017 (0.261)

BANKCONC

0.143 (0.026)

0.109 (0.140) -0.003 (0.002) -0.004 (0.070) -0.001 (0.043) 0.000 (0.557) -0.002 (0.048)

GDP

IND_AGE

INTERNET

Adjusted R

0.556 25

0.579 25

0.531 24

0.581 19

0.696 25

0.619 25

0.471 25

0.480 25

0.519 25

0.625 25

Observations

Table 19: Mutual Fund Industry Competition- Robustness checks

This table reports the results of an OLS regression where the dependent variables is the number of Administrator Companies per million inhabitant (Panel A) and the number of new Administrator companies per million inhabitant (Panel B) All regressions are run with a constant. Columns present the coefficients and below the significance of the coefficients. Explanatory variables are described on table 2. Statistical significant coefficients are at bold.

Panel A: Number of Administrator Companies per million inhabitant (1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

Intercept

0.380 (0.712)

-0.810 (0.159) 0.823 (0.369) -0.011 (0.011)

0.307 (0.162) 2.035 (0.007) -0.010 (0.122)

-0.144 (0.377) 3.336 (0.002) -0.010 (0.157)

-0.512 (0.684) 1.845 (0.002) -0.006 (0.336)

0.136 (0.185) 2.872 (0.017) -0.009 (0.095)

0.335 (0.538)

0.153 (0.833)

-0.539 (0.308) 1.093 (0.076)

-0.557 (0.239) 1.007 (0.045)

KKZ_INDEX

2.569 (0.000)

COMMON

0.107 (0.300)

TURNOVER

-0.007 (0.164)

-0.012 (0.013) 0.164 (0.102)

-0.012 (0.029)

-0.007 (0.238)

ECON_FREEDOM

BANK_RESTRICT

-0.722 (0.356)

2.284 (0.264) 1.896 (0.027)

1.932 (0.277)

CUSTODIAN

BANKCONC

2.999 (0.168)

16.032 (0.063) -0.034 (0.669) 0.155 (0.000) 0.148 (0.000) 0.008 (0.633)

14.980 (0.073)

GDP

AGE

BANKCONC*RESTRICT

-5.601 (0.118)

-4.772 (0.144) 0.537 25

Adjusted R

0.496 25

0.565 25

0.466 24

0.480 19

0.504 25

0.459 25

0.372 25

0.346 25

0.505 24

Observations

Table 19 (Cont.): Mutual Fund Industry Competition- Robustness checks

Panel B: Number of new administrator companies per million inhabitant (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14)

Intercept

0.137 (0.270)

0.495 (0.278) 0.125 (0.255) -0.121 (0.077)

0.584 (0.039) -0.026 (0.625) -0.182 (0.019)

0.107 (0.395) 0.056 (0.240) -0.176 (0.015)

-0.012 (0.950)

0.201 (0.003)

0.104 (0.372)

0.123 (0.052)

0.119 (0.090)

0.127 (0.055)

-0.095 (0.824)

0.180 (0.144)

0.199 (0.184)

0.545 (0.077)

KKZ_INDEX

0.069 (0.071)

COMMON

-0.151 (0.063)

-0.201 (0.003)

-0.192 (0.003)

-0.145 (0.043)

-0.155 (0.026)

-0.212 (0.025)

-0.217 (0.010)

-0.154 (0.064)

-0.164 (0.028)

-0.166 (0.032)

-0.129 (0.028)

TURNOVER

0.156 (0.988)

ECON_FREEDOM

-0.006 (0.444)

0.003 (0.208) -0.149 (0.089) 0.110 (0.464) 0.080 (0.376) 0.063 (0.444) 0.051 (0.528) 0.173 (0.227) 0.960 (0.095) 0.004 (0.087) 0.005 (0.835) 0.002 (0.234) 0.003 (0.113) -0.401 (0.085) -0.226 (0.055) 0.218 25 -0.238 (0.078) 0.180 25 0.544 (0.026) 0.574 (0.042) 0.000 (0.788)

-0.006 (0.205)

BANK_RESTRICT

CUSTODIAN

BANKCONC

0.779 (0.043)

GDP

AGE

BANKCONC*RESTRICT

-0.294 (0.040) 0.223 25

Adjusted R

0.057 25

0.073 26

0.196 25

0.140 19

0.134 19

0.169 19

0.086 26

0.089 26

0.087 26

0.127 26

0.186 25

Observations