A man-bites-dog story from the world of mutual funds

It's fun writing about Wall Street's greedheads and tax dodgers. But every once in a while, I get to write about something positive -- and unpublicized -- that some Wall Street types have done. Today's reversal of the Street's natural order involves Davis Advisers.

The firm, which runs the Davis New York Venture, Selected American Shares and Clipper mutual funds, has voluntarily reduced management fees on those funds and six others. Not because of a problem, not because of competition, but because it wanted to do the right thing for investors.

I stumbled on the cuts, which took effect July 1, one night when I was reading a shareholder report from a Davis-run fund that my family owns. I'd hoped that reading the report would help me fall asleep, but instead I came awake when I found the fee cut, buried in a footnote. (I got the full list of fee cuts when I asked Davis for it.)

Fund firms make their money from fees, which are calculated as a percentage of a fund's assets. To give you the short version, Davis reduced its fees -- which had started at 0.65 percent in Clipper and Selected American and 0.75 percent at Davis New York, and then scaled down -- to a top of 0.55 percent. That reduces the fees that Davis charges the New York Venture, Selected American and Clipper funds by $750,000 a year each.

That isn't a staggering amount of money to investors in those three funds: 1/400 of 1 percent annually for New York Venture, 1/100 for Selected American, 7/100 for Clipper. But it's reasonably serious money for the Davises, who are voluntarily walking away from about $3.3 million a year in fee income.

Russ Kinnel, Morningstar's director of mutual fund research, says that giant firms such as Fidelity, Schwab and Putnam sometimes cut fees for competitive reasons. But it's very unusual, he says, for an already low-cost outfit such as Davis to cut fees on the funds that are the core of its business.

So, what's going on? Chris Davis, the third-generation head of the family-owned management firm, says it cut fees because it was the right thing to do. "If we were starting those funds today, we would start out charging 55 [hundredths of 1 percent]," he said. "There's no reason that investors in those funds should be prisoners of history." (Chris Davis is a director of The Washington Post Co.)

The Davis funds have "breakpoints." That means that as funds grow bigger, each new dollar of assets pays a less-than-fund-average fee, while increasing Davis's total income. It's a virtuous cycle -- the more dollars Davis makes, the less investors pay as a percentage of their investment.

But when the funds got clobbered in the 2008 to early 2009 bear market, the funds' assets fell below their breakpoints, so average fees rose at the same time that the value of investors' shares were being eviscerated. That bothered the Davises, who have more than $1 billion of their own money in their funds, and thus shared investors' pain. (And no, they're not cutting fees to save their own money -- they own only 4 percent or so of the affected funds.)

In addition, Chris Davis says, the managers felt they should give up some fees because fund investors were taking enormous hits, some of which he attributes to his faulty investment decisions.

This is the second time I've seen Davis lower fees. The first was in 2004, when it eliminated the 0.25 percent 12(b)(1) marketing fee for Selected fund investors who held $10,000 or more in the funds directly rather than through fund "supermarkets," like Schwab and Fidelity, that charge managers for shelf space.

That cut was prompted by Selected's feisty board of directors, which a decade earlier had hired Davis to replace the previous managers. But the recent cut was purely voluntary, says Jim McMonagle, Selected's chairman. "Chris just told us Davis was cutting fees," he said. "We didn't ask him to do that."

So there it is: Wall Street acting good. Next on the agenda: looking west to see the sun rise.

Allan Sloan is Fortune magazine's senior editor at large.