527 F.3d 627 (7th Cir. 2008)
Plaintiffs, who owned shares in several mutual funds, contended that the fees were too high and thus violated § 36(b) of the Investment Company Act of 1940.
- The instant court found that defendant charged a lower percentage of assets to other clients, but this did not imply that it must be charging too much to the funds.
- The instant court reasoned that different clients called for different commitments of time. Pension funds had low (and predictable) turnover of assets.
- Mutual funds may grow or shrink quickly and must hold some assets in high-liquidity instruments to facilitate redemptions.
- That complicated an adviser's task.
- The instant court also reasoned that joint costs likewise make it hard to draw inferences from fee levels.
- Some tasks in research, valuation, and portfolio design would have benefits for several clients.
- In competition those joint costs were apportioned among paying customers according to their elasticity of demand, not according to any rule of equal treatment.
- The court also found that the fees were not hidden from investors--and the funds' net return had attracted new investment rather than driving investors away.
The judgment was affirmed.
Recommended Supplements for Corporations and Business Associations Law