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It's all in the name: Mutual fund name changes after SEC Rule 35d-1

Author

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  • Espenlaub, Susanne
  • Haq, Imtiaz ul
  • Khurshed, Arif

Abstract

We study how investors respond to ‘superficial’ mutual-fund name changes that occur for no fundamental reasons. We find that such name changes remain widespread even after regulation to curb potentially misleading name changes (SEC Rule 35d-1). Superficial changes are more widespread than previously studied ‘misleading’ changes that are not accompanied by corresponding portfolio adjustments reflecting the investment style suggested by the new name. Superficial changes appear to be driven by managerial incentives. Investors react to superficial changes with increased fund flows but appear to gain no benefit through improved performance or lower fees. On the contrary, name-change funds underperform as a group. Our findings highlight inefficiencies in the mutual-fund market and hold important implications for the stakeholders involved.

Suggested Citation

  • Espenlaub, Susanne & Haq, Imtiaz ul & Khurshed, Arif, 2017. "It's all in the name: Mutual fund name changes after SEC Rule 35d-1," Journal of Banking & Finance, Elsevier, vol. 84(C), pages 123-134.
    • Handle: RePEc:eee:jbfina:v:84:y:2017:i:c:p:123-134
    DOI: 10.1016/j.jbankfin.2017.07.008
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    References listed on IDEAS

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    Cited by:

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    4. Shi, Yang & Chen, Shu & Liu, Ruiming & Kang, Yankun, 2022. "Fund renaming and fund flows: Evidence from China's stock market crash in 2015," Economic Modelling, Elsevier, vol. 108(C).

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    More about this item

    Keywords

    Mutual funds; SEC Rule 35d-1; Name changes; Fund flows;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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