How Sweden Manages Fund Management - a descriptive and analytical assessment of central Swedish law and regulation concerning fund investment in the 1990-2007 period

Sammanfattning: Private fund investment in Sweden is important to households, and fund investor interests are considered in legislation and regulation. There is a lack of studies covering the role of Swedish legislation and regulation in safeguarding these interests. A descriptive review of major regulatory codes and laws in the 1990 to 2007 period is conducted, after which select changes made effective in 2004 are highlighted. Using a statistical database for the years 1999 to 2007 covering, inter alia, the disclosure of fees to customers, it is tested 1) if disclosure of the Total Expense Ratio increases following new regulation in 2004, and 2) if benefits to customers from investing in Swedish equity funds has fallen cause of increasing fees following a 2004 law change. Testing the second hypothesis involves a regression of fund returns on stock market benchmarks as well as Fama-French and Carhart factors. The results support the first hypothesis but not the second. It is noted that while Swedish fund companies have abstained from increasing fees under the new legal cover, the performance of their equity funds fall below the fees charged for management.