FYI: In a recent article, The New York Times highlighted the high cost of funds from the Baron Funds group, which manages about $26 billion in assets. For example, the flagship fund, Baron Growth (BGRFX), which manages more than $6 billion, has an expense ratio of 1.3%. Baron Funds founder Ronald Baron argues in the article his skills and experience justify the fund family’s high fees.
To see if this is actually the case, we can put BGRFX’s performance through a regression analysis, which shows the source of its returns. This allows us to determine whether the fund’s returns were a result of loading on common factors, or if they derive from stock-picking and market-timing skill (alpha).
Regards,
Ted
http://www.etf.com/sections/index-investor-corner/swedroe-do-funds-earn-their-fees
