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Are banks better money doctors? An analysis of mutual fund flows of bank and non-bank funds using Canadian data

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  • Hebb, Greg
  • Lin, Shannon

Abstract

This study uses Canadian mutual fund data from 2005 to 2020 to compare fund flows of bank managed mutual funds with those of non-bank managed mutual funds. We document that relative to non-bank funds, bank funds consistently exhibit lower flows on a monthly basis. Moreover, bank funds demonstrate lower flow-sensitivity to performance than non-bank funds. Further investigation reveals this effect is driven largely by lower outflows following poor performance, as it appears that these investors are trusting of fund managers enough to stay the investment course. We further separate the data into equity, bond, and balanced funds and find that the flow difference between bank and non-bank funds is largest in equity funds, smaller in balanced funds, but non-existent in bond funds. Finally, we document that this effect is dramatically weakening over our sample period. Our study has meaningful implications for regulators, fund investors, banks, as well as mutual fund managers.

Suggested Citation

  • Hebb, Greg & Lin, Shannon, 2024. "Are banks better money doctors? An analysis of mutual fund flows of bank and non-bank funds using Canadian data," The North American Journal of Economics and Finance, Elsevier, vol. 69(PA).
    • Handle: RePEc:eee:ecofin:v:69:y:2024:i:pa:s1062940823001481
    DOI: 10.1016/j.najef.2023.102025
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    More about this item

    Keywords

    Mutual funds; Fund performance; Mutual fund flow; Commercial banks;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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