Business, Management and Accounting
4 years ago

Mutual fund families favor high value funds, leaving low value funds behind.

The Journal of Finance
Favoritism in Mutual Fund Families? Evidence on Strategic Cross‐Fund Subsidization
José‐Miguel Gaspar, Massimo Massa, Pedro Matos

Paper Summary

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Mutual fund families may play favorites by transferring performance between funds to benefit the ones with higher fees or past success. These "high value" funds tend to do better than "low value" funds within the same family, even outperforming similar funds from different families. This advantage is partly due to better deals on initial public offerings and opposite trades between family funds. This study shows how mutual fund families can create imbalances in how they manage assets.