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Ownership, risk and performance of mutual fund management companies

  • Berkowitz, Michael K.
  • Qiu, Jiaping

This paper compares the performance of mutual funds managed by publicly-traded management companies with those managed by private management companies. We find that publicly-traded management companies invest in riskier assets and charge higher management fees than do the funds managed by private management companies. The risk-adjusted returns of the mutual funds managed by publicly-traded management companies are also lower than those of the mutual funds managed by private management companies. This finding is consistent with both a risk spreading and agency cost argument. The paper also shows that the idiosyncratic risk of the publicly-traded management company's stock significantly differs from the idiosyncratic risk of the assets they manage, suggesting that previous research using the stock's idiosyncratic risk as a proxy for the idiosyncratic risk of the company's assets to study the determinants of publicly-traded companies' ownership concentration may be misleading.

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Article provided by Elsevier in its journal Journal of Economics and Business.

Volume (Year): 55 (2003)
Issue (Month): 2 ()
Pages: 109-134

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Handle: RePEc:eee:jebusi:v:55:y:2003:i:2:p:109-134
Contact details of provider: Web page: http://www.elsevier.com/locate/jeconbus

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