It Pays to Set the Menu Mutual Fund Investment Options in 401(k) Plans

mandag, 28 juli 2014

This paper investigates whether mutual fund families acting as trustees of 401(k) plans display favoritism toward their own funds.

Using a hand-collected dataset on retirement investment options, we show that poorly-performing funds are less likely to be removed from and more likely to be added to a 401(k) menu if they are aliated with the plan trustee. We nd no evidence that plan participants undo this aliation bias through their investment choices. Finally, the subsequent performance of poorly-performing afliated funds indicates that these trustee decisions are not information driven and are costly to retirement savers.