MUTUAL FUND FEES ARE FAIR, STUDY SAYS, THOUGH OTHERS STILL SEE FAT IN FIGURES: SOMEONE HAS TO PAY FOR ANALYSTS, SERVICE

Do mutual fund companies deserve a break from the constant criticism of their management fees?

A recent study and even some advisers suggests they do.

Mutual funds are priced reasonably, according to a study conducted by Boston-based Financial Research Corp., a firm that just happens to help mutual fund companies develop marketing strategies.

“Over the past few years, writes Neil Bathon, the firm’s president, “fund companies have become much more proactive in controlling fees than they had been previously, instituting asset-based break points in their funds’ fee structures.”

not bad, considering

Most financial advisers enjoy lambasting the fund industry, claiming it’s greedy given the amount of money it has raked in during the current record bull market. But at least one adviser agrees the average expense ratio for equity funds .942, according to FRC is pretty reasonable because fund firms do all the work for investors.

“I would gladly pay Fidelity Investments 1% to go and meet with 500 companies, and do all the research, because I don’t have the time to do that,” says Carl Zuckerberg, an adviser with Fleming, Relyea & Cox in Stamford, Conn.

“The press gets it wrong by automatically assuming that because assets triple, expenses should go down,” Mr. Bathon says. He points out that mutual funds have hefty start-up costs, and they have been upgrading services increasing analyst staff, providing 24-hour services for shareholders.

“These things all add up,” he says.

But others take issue with Mr. Bathon’s findings. Chicago-based mutual fund tracker Morningstar Inc., for example, has conducted its own study of expenses and reached a different conclusion.

still pricey

It indicates that even with enhanced services, expenses should have reflected the increase in fund assets. “The argument that services have improved, that’s certainly true,” says Amy Arnott, editor of the newsletter Morningstar Mutual Funds. “But you could say that
new cars today are better than they were 30 years ago, but you wouldn’t want to pay $30,000 for a Ford Escort.”