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Mutual Fund Incubation and the Role of the Securities and Exchange Commission

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Author Info
Carl Ackermann ()
Tim Loughran ()
Abstract

A mutual fund family incubates a fund when it creates a privately subsidized fund not available to the general investing public. It destroys unsuccessful incubator funds. The few successful funds will report higher incubation returns than the market return in advertisements intended to attract money from individual investors. This practice is currently allowed by the SEC. The evidence is that incubation returns are not a good predictor of subsequent fund performance and likely serve to mislead unsuspecting investors. Copyright Springer Science+Business Media, Inc. 2007

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File URL: http://hdl.handle.net/10.1007/s10551-006-9081-x
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Publisher Info
Article provided by Springer in its journal Journal of Business Ethics.

Volume (Year): 70 (2007)
Issue (Month): 1 (January)
Pages: 33-37
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Handle: RePEc:kap:jbuset:v:70:y:2007:i:1:p:33-37

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Web page: http://www.springerlink.com/link.asp?id=100281

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Related research
Keywords: mutual funds; incubation; Securities and Exchange Commission;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Brown, Stephen J. & Goetzmann, William N., 1997. "Mutual fund styles," Journal of Financial Economics, Elsevier, vol. 43(3), pages 373-399, March. [Downloadable!] (restricted)
    Other versions:
  2. Carhart, Mark M, 1997. " On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Robert Battalio & Tim Loughran, 2008. "Does Payment For Order Flow To Your Broker Help Or Hurt You?," Journal of Business Ethics, Springer, vol. 80(1), pages 37-44, June. [Downloadable!] (restricted)
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This page was last updated on 2009-12-10.

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