Working Paper: CEPR ID: DP4788
Authors: Jos Miguel Gaspar; Massimo Massa; Pedro Matos
Abstract: We investigate whether mutual fund families strategically transfer performance across member funds to favour 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 affiliated with the same family. Better allocations of underpriced IPO deals 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 generates distortions in delegated asset management.
Keywords: mutual funds; cross-fund subsidization; IPO allocation
JEL Codes: G23; G11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| High value funds (G23) | Low value funds (G23) |
| Family affiliation (J12) | Fund performance (G19) |
| High value funds (G23) | Performance gap (D29) |
| Performance gap (D29) | Low value funds (G23) |
| Better allocation of underpriced IPO deals (G24) | High value funds (G23) |
| Coordinated trading strategies (C70) | High value funds (G23) |