Is Fund Fee Correlated Positively with Manager's Ability——Analysis based on the Type of Fund Investor

Along with the explosive growth of China's fund industry,the market has more than sixty fund management companies in the end of 2010.But the management fee of the fund industry is six times than investors' revenue,which has become an anomaly in the fund industry.Considering fund investors are not all rational,this paper divides the investors into sophisticated and unsophisticated investor,investigates the relationship between fund manager's ability and fee ratio.The results show that they vary inversely after the ratio of unsophisticated investors exceeds a critical value.Moreover,along with the ratio increasing,the managers obtain more invest return and investors obtain less.The manager profit is about six times of investor profit in 2010,which reflects the high ratio of unsophisticated investors in China fund industry.