“The trade group for the mutual fund industry will release another volley today in its continuing campaign to prove that the New York State attorney general, Eliot Spitzer, is wrong in saying that funds pay more than they should for money management services,” writes Diana Henriques in today’s New York Times.

“The new study, by Sean Collins, a senior economist at the trade group, the Investment Company Institute, supports the conclusions of a brief report the group issued in November. That report found near parity in the advisory fees paid by public pension funds and the so-called subadviser fees that mutual fund managers pay when they farm out the management of a portion of their portfolios to another investment adviser.”

“Both studies found that those fees, on average, are about the same for each dollar under management – 28 basis points for public pension plans and 31 basis points for subadvised mutual funds. A basis point is one-hundredth of 1 percent, so a fee of 28 basis points results in a $28 fee for every $10,000 invested.”

“But a draft copy of the new report marshals more extensive arguments in an effort to rebut an academic study that Mr. Spitzer has cited in his complaints about fund management fees. The study, which appeared almost three years ago in the Journal of Corporation Law, was written by John P. Freeman, a professor of legal and business ethics at the University of South Carolina, and Stewart L. Brown, a finance professor at Florida State University.”

“In ‘Mutual Fund Advisory Fees: The Cost of Conflict of Interest,’ the professors said that fund investors were paying more for advice than they should because fund boards with conflicts failed to negotiate better money management deals.”

“Both studies rely on public pension funds as the benchmark for investment advisory fees paid by mutual funds. The Freeman-Brown study found that public pension funds paid just 21 basis points for investment advice on the management of large-capitalization stock funds, compared with 52 basis points paid by investors in similar mutual funds.”

“Pension funds paid 42 basis points for the management of midsize-capitalization funds and 58 basis points for small-capitalization funds, while mutual funds paid 71 basis points in both cases, that study showed.”

“The new Investment Company Institute study echoes the argument that the fees paid by mutual funds cover a broader assortment of services than those paid by pension funds and that their fees cannot therefore be fairly compared. But the new study concludes that operational differences between public pension funds and mutual funds have a significant effect on management fees.”