RT Journal Article
SR Electronic
T1 Should Investors Care About Mutual Fund Governance Quality: <em>Evidence From Morningstar Stewardship Ratings?</em>
JF The Journal of Wealth Management
FD Institutional Investor Journals
SP jwm.2018.1.065
DO 10.3905/jwm.2018.1.065
A1 Jonathan Handy
A1 Hunter Nichols
A1 Thomas Smythe
YR 2018
UL https://pm-research.com/content/early/2018/10/05/jwm.2018.1.065.abstract
AB This article utilizes Morningstar Governance Ratings (MGRs) to analyze mutual fund expenses and create an indirect proxy for mutual fund performance. The results differ across ratings type and fund structure. In general, multiple share class (MS) funds do not have lower expenses, which is surprising since MS funds were created explicitly to have lower expenses. Additionally, MGRs impact expenses differently for each fund structure type: a higher board quality rating is only correlated with lower expense ratios for MS funds, while higher managerial incentive ratings are correlated with higher expenses for Non-MS funds and lower expenses for MS funds. When considering that a main impetus for creating MS funds is to lower investor expenses, it is of interest that only funds with higher stewardship ratings seemingly have lower expenses.