Umeå University's logo

This thesis investigates the relationship between the total expense ratio and the 5-year performance to last month for sustainable mutual funds registered in Sweden and the United States. The increasing amount of mutual funds and the shift towards sustainability in the society gives cause to study the relationship between the total expense ratio and the performance of sustainable mutual funds rather than conventional mutual funds. The analysis was conducted by testing the relationships through different regression models for both the Swedish and the U.S. market. A simple regression model was conducted for both markets to study the relation that the total expense ratio has to the 5-year performance to last month. To further analyse the relation between the two variables, a multiple regression model was conducted for both markets to further analyse the significant relationship between the total expense ratio and the 5-year performance to last month. The data was collected via Eikon and included mutual funds registered in Sweden and the U.S., each mutual fund collected was retrieved together with an ESG score which was the definitive factor whether the mutual fund could be considered as sustainable or not.

The results gathered from the simple regression model for the Swedish market was found to have no significant relationship and the explanatory degree for the regression model was very low. The results regarding the simple regression model for the U.S. market are however found to be significant but with a low degree of explanation as well. Hence the result from this study indicates that there is no significant relationship between the total expense ratio and the 5-year performance to last month for the Swedish market when conducting a simple regression model, while the U.S. market has a low significant relationship between the variables. However, a multiple regression model for the Swedish market containing additional control variables presents a significant relationship between the total expense ratio and the 5-year performance to last month. The same results were found for the U.S. market when conducting a multiple regression model.

The results for the Swedish simple regression model align with previous studies conducted within this area, where previous studies have found there to be no significant relationship between the total expense ratio and the performance of mutual funds, hence same results are applicable to sustainable mutual funds. However, this study did in fact also display significant relationships for the multiple regression model for the Swedish market as well as for both regression models for the U.S. market. Which indicates that the total expense ratio to some extents have an explanatory relationship between the total expense ratio and the 5-year performance to last month for sustainable mutual funds in both the Swedish market and the U.S. market.