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Favouritism in Mutual Fund Families? Evidence on Strategic Cross-Fund Subsidization

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  • Matos, Pedro Pinto
  • Massa, Massimo
  • Gaspar, José-Miguel

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.

Suggested Citation

  • Matos, Pedro Pinto & Massa, Massimo & Gaspar, José-Miguel, 2004. "Favouritism in Mutual Fund Families? Evidence on Strategic Cross-Fund Subsidization," CEPR Discussion Papers 4788, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4788
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    Cited by:

    1. Alexander Kempf & Stefan Ruenzi, 2008. "Tournaments in Mutual-Fund Families," The Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 1013-1036, April.
    2. Kempf, Alexander & Ruenzi, Stefan, 2005. "Status quo bias and the number of alternatives: An empirical illustration from the mutual fund industry," CFR Working Papers 05-07, University of Cologne, Centre for Financial Research (CFR).

    More about this item

    Keywords

    Ipo; Mutual funds;

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