THE STRUCTURE OF MUTUAL FUND CHARGES

This paper provides an explanation for the diversity in investment str ategies and fees of open-end mutual funds. Mutual funds seek to dissua de redemptions through front- and back-end load fees. The empirical ev idence is consistent with model predictions that such fees dissuade re demptions in open-end funds, and that funds hold more cash when there is uncertainty about redemptions. Furthermore, funds with load and red emption fees hold less cash that their no-load counterparts. The resul ts suggest that aggressive funds are sensitive to cash flows and are l ikely to rely on fees to dissuade redemptions.