Cannibalization and Scope Economies within Fund Families: The Impact of Passive Investing on Active Fund Fees
Published:
This paper analyzes how the rise of passive funds, such as index funds and ETFs, affects price competition in the mutual fund industry using structural demand estimation. Modeling mutual fund companies as multi-product producers, it considers strategic pricing and cost synergies from managing both fund types. Results show that multi-product families set higher fees by internalizing competition within the family, raising fees by 1–2 basis points, but cost synergies reduce fees by 35 basis points for active funds and 5 for passive funds.
Recommended citation: Taisei Noda. (2024). "Cannibalization and Scope Economies within Fund Families: The Impact of Passive Investing on Active Fund Fees." Mimeo
Download Paper