Fund performance and scale drive management fees, impacting investment fund profitability.
The study analyzed data from 2000 to 2003 to understand how fund performance and size affect management fees. In 2000 and 2001, fund performance and scale were key factors influencing fees. However, after 2002, when performance bonuses were no longer given, the relationship between fund performance and fees became less clear. Surprisingly, the study found that fund income had a negative impact on management fees.