Working Paper: NBER ID: w27551
Authors: Lubos Pastor; M Blair Vorsatz
Abstract: We present a comprehensive analysis of the performance and flows of U.S. actively-managed equity mutual funds during the COVID-19 crisis of 2020. We find that most active funds underperform passive benchmarks during the crisis, contradicting a popular hypothesis. Funds with high sustainability ratings perform well, as do funds with high star ratings. Fund out ows surpass pre-crisis trends, but not dramatically. Investors favor funds that apply exclusion criteria and funds with high sustainability ratings, especially environmental ones. Our finding that investors remain focused on sustainability during this major crisis suggests they view sustainability as a necessity rather than a luxury good.
Keywords: mutual funds; performance; COVID-19; sustainability; flows
JEL Codes: G01; G11; G12; G14; G23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| sustainability ratings (Q01) | fund performance (G14) |
| active funds (G23) | underperformance relative to passive benchmarks (G11) |
| star ratings (Y10) | fund performance (G14) |
| growth funds (G23) | outperform value funds (G11) |
| fund flows (F21) | performance (D29) |