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The main hypothesis of the paper is that as a result of the tax incentives offered to the Barbados mutual fund industry the demand for these products is not significantly related to their return. To investigate this hypothesis, the paper estimates a model of the demand for mutual funds and test whether the coefficient of the return on mutual funds can be restricted to zero. The paper finds that the main determinants of the demand for mutual funds in Barbados are income and previous investment inflows, while the return on the fund and other mutual funds do not significantly influence demand.