Favoritism in mutual fund families? evidence on strategic cross-fund subsidization

Deskripsi

We investigate whether mutual fund familiies strategically transfer performance across member funds ot favor those more likely to increase overall family profits. We find that "high family value" funds (i.e., high fees or high past performers) overperform at the expense of "low value" funds. Such a performance gap is above the one existing between similar funds not affliated with the same family. Better allocations of underpirced intial public offering deal and opposite trades across member funds partly explain why high value funds overperform. Our findings highlight how the family organization prevalent in the mutual fund industry generate distortions in delegated asset management..Printed Journal