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Does Individual Fund Shareholder Structure Matter? A Study of Exclusive Funds in Brazil

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  • Hsiu-lang Chen

    (Department of Finance, University of Illinois at Chicago, 601 South Morgan Street, Chicago, IL 60607, U.S.A.)

  • Rodrigo F. Malaquias

    (Department of Finance, School of Business and Management, Federal University of Uberlandia Av., Jo?o Naves de ¨¢vila, no 2121, Room 1F-200, Uberlandia, MG 38400-902, BRAZIL)

Abstract

This study investigates the role of fund shareholder structure on the agency conflicts in delegated investment management. An exclusive fund is designed to receive investments from one investor only and it is unique in Brazil. Specifically, we examine equity fund managers who manage both exclusive mutual funds and traditional mutual funds in Brazil. We find that the 4-factor alpha of exclusive funds from a manager who manages both exclusive and traditional funds is higher than that of the manager¡¯s traditional funds. Furthermore, we show that a fund manager has a greater incentive to improve his/her exclusive funds instead of traditional funds when both suffer poor performance. The behavior of prioritizing shareholders of exclusive funds is particularly strong during a period when the market volatility is high.

Suggested Citation

  • Hsiu-lang Chen & Rodrigo F. Malaquias, 2018. "Does Individual Fund Shareholder Structure Matter? A Study of Exclusive Funds in Brazil," Review of Economics & Finance, Better Advances Press, Canada, vol. 12, pages 1-15, May.
    • Handle: RePEc:bap:journl:180201
    Note: Chen gratefully acknowledges the support from the Dean¡¯s Summer Research Grant Program at the University of Illinois at Chicago. Malaquias thanks FAPEMIG for the support in developing the database for this study (APQ-01265-14), and Prof. William Eid Jr. for his comments on characteristics of Exclusive Funds in Brazil. All errors remain our responsibility.
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    More about this item

    Keywords

    Exclusive mutual funds; Conflict of interest; Delegated investment management; Agency conflicts; 4-factor alpha;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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