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Self-Interest on Mutual Fund Management: Evidence from the Portuguese Market

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Author Info
Carlos Alves () (CEMPRE, Faculdade de Economia, Universidade do Porto)
Victor Mendes () (CMVM – Comissão do Mercado de Valores Mobiliários)

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Abstract

Institutional investors manage an increasingly substantial share of securities in the developed markets. Previous research has concluded that mutual funds’ clients do have asymmetric reactions, for they increase capital flows to mutual funds that are winners in performance, but fail to move away from performance losers. Such an asymmetric behavior gives the mutual fund manager the opportunity to optimize the fund’s own interests, not the participants’. In this paper we investigate self-interest on Portuguese equity mutual fund management. Our results show that, in Portugal, mutual funds tend to exhibit biased portfolios, i.e., financial assets of the group’s parent company outweigh other financial asset holdings. This cannot be explained by performance, risk or securities' characteristics, and is consistent with the hypothesis of the existence of self-interest on mutual fund management.

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Publisher Info
Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 162.

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Length: 28 pages.
Date of creation: Nov 2004
Date of revision:
Handle: RePEc:por:fepwps:162

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Related research
Keywords: Institutional Investors; Agency Costs; Portfolio Choice; Government Policy and Regulation;

Find related papers by JEL classification:
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
G20 - Financial Economics - - Financial Institutions and Services - - - General

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    Other versions:
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  9. Carlos Alves & Victor Mendes, 2001. "Corporate Governance Policy and Company Performance: The Case of Portugal," FEP Working Papers 112, Universidade do Porto, Faculdade de Economia do Porto. [Downloadable!]
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  12. Elton, Edwin J, et al, 1993. "Efficiency with Costly Information: A Reinterpretation of Evidence from Managed Portfolios," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 6(1), pages 1-22. [Downloadable!] (restricted)
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    Other versions:
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