Fund Fees on Trial

The most intriguing outcome would be a court ruling that puts downward pressure on fees.

When it comes to setting fees for mutual funds, sponsors have a fiduciary duty to act in the best interest of their customers. What that duty entails has long been the subject of debate. But sometime in the next few months the U.S. Supreme Court may clear up the matter once and for all.

The high court recently heard arguments in a lawsuit filed against Harris Associates, the Chicago money-management firm that runs the Oakmark funds. The case revolves around the discrepancy between what Harris charges for managing the funds and what it charges to run institutional accounts. The Seventh Circuit Court of Appeals ruled that courts needn’t get involved because the marketplace could handle the matter efficiently -- investors, for example, could vote with their feet by switching to lower-cost fund providers.

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Russel Kinnel
Contributing Editor, Kiplinger's Personal Finance