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Managerial Investment in Mutual Funds

Author

Listed:
  • Abigail S. Hornstein

    (Department of Economics, Wesleyan University)

  • James Hounsell

    (Centerview Partners, New York)

Abstract

The SEC requires mutual fund managers to disclose annually investments in self-managed funds. We examine whether such investments align managerial and investor interests using a hand- collected panel dataset at nearly 400 no load funds. We believe we are the first to document and examine the time series variation in these investments. Managerial investment fluctuates markedly within funds, contrary to prior researchers’ assumptions that the levels would be non- decreasing, and is not systematically related to fund characteristics. Fund returns are higher for solo-managed funds with managerial investment. On the other hand, team-managed funds have lower excess returns and management fees when managers invest more in the fund. These results suggest that managerial investment does not signal interest alignment but is rather an idiosyncratic personal decision.

Suggested Citation

  • Abigail S. Hornstein & James Hounsell, 2013. "Managerial Investment in Mutual Funds," Wesleyan Economics Working Papers 2013-005, Wesleyan University, Department of Economics.
    • Handle: RePEc:wes:weswpa:2013-005
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    File URL: http://repec.wesleyan.edu/pdf/ahornstein/2013005_hornstein.pdf
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    More about this item

    Keywords

    mutual funds; managerial ownership; fund governance; fund performance;
    All these keywords.

    JEL classification:

    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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