It Pays to Set the Menu: Mutual Fund Investment Options in 401(k) Plans
This paper investigates whether mutual fund families acting as trustees of 401(k) plans display favoritism toward their own funds. Using a hand-collected dataset on retirement investment options, we show that poorly-performing funds are less likely to be removed from and more likely to be added to a 401(k) menu if they are affiliated with the plan trustee. We find no evidence that plan participants undo this affiliation bias through their investment choices. Finally, the subsequent performance of poorly-performing affiliated funds indicates that these trustee decisions are not information driven and are costly to retirement savers.
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Copy CitationVeronika K. Pool, Clemens Sialm, and Irina Stefanescu, "It Pays to Set the Menu: Mutual Fund Investment Options in 401(k) Plans," NBER Working Paper 18764 (2013), https://doi.org/10.3386/w18764.Download Citation
Published Versions
Veronika K. Pool & Clemens Sialm & Irina Stefanescu, 2016. "It Pays to Set the Menu: Mutual Fund Investment Options in 401(k) Plans," Journal of Finance, American Finance Association, vol. 71(4), pages 1779-1812, 08. citation courtesy of 
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