Why Fund Fees Are So High

A series of lawsuits points a finger at "co-opted" directors

High mutual-fund expenses can eat away at shareholder profits, and numerous lawsuits have tried in vain to force fund companies to lower their fees. But a series of suits filed in recent weeks attacks the fee issue in an unusual way--by challenging the independence of fund directors. The shareholder suits against Fidelity, Prudential, T. Rowe Price, BlackRock, and BEA Associates claim directors consented to high fees only after being "co-opted" by fund-management companies through high compensation and appointments to multiple fund boards within the same fund company. Directors "are no longer independent watchdogs," the suits contend.

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