Mutual Fund Excessive Fee Case

Summary judgment was granted February 27, 2008, in favor of an Analysis Group client, a mutual fund advisor, in the Northern District of Illinois. The judge's decision, rejecting shareholder claims of excessive fees under Section 36(b) of the Investment Company Act, may mark the first such granting in a Section 36(b) case. Plaintiff's claims were rejected on merits without a trial following discovery and deposition. 

Analysis Group was retained by Ropes & Gray, and supported two experts who provided reports and deposition testimony in the matter: Professor Ajay Khorana, who analyzed competition and economies of scale in the mutual fund industry, and retail fees compared to institutional fees; and affiliate Professor  Laura Starks, who assessed the governance processes involved in fund management. 

In his finding, the judge noted the limited role of the court in assessing how fees are determined and affirmed that the fact that an advisor may charge higher fees to manage a mutual fund than to manage an institutional fund does not indicate that the fees are excessive, and that fees are a product of give-and-take negotiation in which there is no single correct outcome. CEO and Chairman Martha Samuelson and Senior Advisor Michael Quinn led the Analysis Group team, which also included Managing Principal Aaron Yeater and Vice President Michael Holland.

Testifying Experts