A Comparison of Bank and Non-bank Funds in the French Market

The European mutual fund markets in general, and the French in particular, are dominated by banks that create and distribute 80% of their funds. Thus, investors can be “captive” and less sensitive to a fund’s performance, which can provide “market power” to the funds. This paper presents a comparison of the performance, fees and the investors’ performance sensitivity between bank and non-bank funds. Using a sample of French equity funds from January 1999 to April 2008, I observe that in the French market, bank funds underperform compared to non-bank funds. Further, clients of bank funds seem to be less sensitive to performance than investors of non-bank funds. However, there is no significant difference in fees between bank and non-bank funds. This paper is the first empirical study of this question for the French case, the biggest mutual fund market in Europe.