Mutual fund performance when parent firms simultaneously manage hedge funds
This study examines the performance of mutual funds managed by firms that simultaneously manage hedge funds. We find that the reported returns of mutual funds in these "side-by-side" associations with hedge funds significantly underperformed those of mutual funds that shared similar fund and family characteristics but differed in that they were not affiliated with hedge funds. Digging deeper into performance, we find that the underperformance was confined to return gaps, a return measure that captures the impact of unobservable managerial actions. Interestingly, mutual funds with investment styles that were most closely aligned to affiliated hedge funds generated reported-return alphas and return gaps that underperformed by the greatest amount. Finally, we find that side-by-side mutual funds received less of a contribution to performance from IPO underpricing than similar unaffiliated mutual funds or affiliated hedge funds. Evidence does not support the hypothesis that affiliations with hedge funds allow side-by-side mutual funds to attract superior stock-picking talent. Our evidence does not allow us to rule out the possibility that management firms maximized fee income by strategically transferring performance from mutual funds to hedge funds.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Goetzmann, William N. & Ivković, Zoran & Rouwenhorst, K. Geert, 2001.
"Day Trading International Mutual Funds: Evidence and Policy Solutions,"
Journal of Financial and Quantitative Analysis,
Cambridge University Press, vol. 36(03), pages 287-309, September.
- William Goetzmann & Zoran Ivkovich & K. Rouwenhorst, 2000. "Day Trading International Mutual Funds: Evidence And Policy Solutions," Yale School of Management Working Papers ysm138, Yale School of Management, revised 01 Jun 2001.
- Jonathan Reuter, 2006. "Are IPO Allocations for Sale? Evidencefrom Mutual Funds," Journal of Finance, American Finance Association, vol. 61(5), pages 2289-2324, October.
- Joseph Chen & Harrison Hong & Ming Huang & Jeffrey D. Kubik, 2004. "Does Fund Size Erode Mutual Fund Performance? The Role of Liquidity and Organization," American Economic Review, American Economic Association, vol. 94(5), pages 1276-1302, December.
- Eric Zitzewitz, 2006. "How Widespread Was Late Trading in Mutual Funds?," American Economic Review, American Economic Association, vol. 96(2), pages 284-289, May.
- Zitzewitz, Eric, 2003. "How Widespread Is Late Trading in Mutual Funds?," Research Papers 1817, Stanford University, Graduate School of Business.
- Eric Zitzewitz, 2005. "How Widespread is Late Trading in Mutual Funds?," Finance 0501002, EconWPA.
- Marcin Kacperczyk & Clemens Sialm & Lu Zheng, 2008. "Unobserved Actions of Mutual Funds," Review of Financial Studies, Society for Financial Studies, vol. 21(6), pages 2379-2416, November.
- Marcin Kacperczyk & Clemens Sialm & Lu Zheng, 2005. "Unobserved Actions of Mutual Funds," NBER Working Papers 11766, National Bureau of Economic Research, Inc.
- Russ Wermers, 2000. "Mutual Fund Performance: An Empirical Decomposition into Stock-Picking Talent, Style, Transactions Costs, and Expenses," Journal of Finance, American Finance Association, vol. 55(4), pages 1655-1703, August.
- Eric Zitzewitz, 2003. "Who Cares About Shareholders? Arbitrage-Proofing Mutual Funds," Journal of Law, Economics, and Organization, Oxford University Press, vol. 19(2), pages 245-280, October.
- Zitzewitz, Eric, 2002. "Who Cares About Shareholders? Arbitrage-Proofing Mutual Funds," Research Papers 1749, Stanford University, Graduate School of Business.
- Chevalier, Judith & Ellison, Glenn, 1997. "Risk Taking by Mutual Funds as a Response to Incentives," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1167-1200, December.
- Judith A. Chevalier & Glenn D. Ellison, 1995. "Risk Taking by Mutual Funds as a Response to Incentives," NBER Working Papers 5234, National Bureau of Economic Research, Inc.
- Chevalier, J. & Ellison, G., 1996. "Risk Taking by Mutual Funds as a Response to Incentives," Working papers 96-3, Massachusetts Institute of Technology (MIT), Department of Economics.
- Lu Zheng, 1999. "Is Money Smart? A Study of Mutual Fund Investors' Fund Selection Ability," Journal of Finance, American Finance Association, vol. 54(3), pages 901-933, June.
- Grinblatt, Mark & Titman, Sheridan D, 1989. "Mutual Fund Performance: An Analysis of Quarterly Portfolio Holdings," The Journal of Business, University of Chicago Press, vol. 62(3), pages 393-416, July.
- Mark Grinblatt & Sheridan Titman, "undated". "Mutual Fund Performance: An Analysis of Quarterly Portfolio Holdings," Rodney L. White Center for Financial Research Working Papers 23-88, Wharton School Rodney L. White Center for Financial Research.
- Edelen, Roger M., 1999. "Investor flows and the assessed performance of open-end mutual funds," Journal of Financial Economics, Elsevier, vol. 53(3), pages 439-466, September.
- Gibson, Scott & Safieddine, Assem & Titman, Sheridan, 2000. "Tax-Motivated Trading and Price Pressure: An Analysis of Mutual Fund Holdings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(03), pages 369-386, September.
- Carhart, Mark M, 1997. " On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
- Vikram Nanda, 2004. "Family Values and the Star Phenomenon: Strategies of Mutual Fund Families," Review of Financial Studies, Society for Financial Studies, vol. 17(3), pages 667-698.
- Erik R. Sirri & Peter Tufano, 1998. "Costly Search and Mutual Fund Flows," Journal of Finance, American Finance Association, vol. 53(5), pages 1589-1622, October.
- Nicolaj Siggelkow, 2003. "Why Focus? A Study Of Intra-Industry Focus Effects," Journal of Industrial Economics, Wiley Blackwell, vol. 51(2), pages 121-150, June.
- Rahul Bhargava & Ann Bose & David A. Dubofsky, 1998. "Exploiting International Stock Market Correlations with Open-end International Mutual Funds," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(5&6), pages 765-773.
- José-Miguel Gaspar & Massimo Massa & Pedro Matos, 2006. "Favoritism in Mutual Fund Families? Evidence on Strategic Cross-Fund Subsidization," Journal of Finance, American Finance Association, vol. 61(1), pages 73-104, February.
- Frank, Mary Margaret & Poterba, James M & Shackelford, Douglas A & Shoven, John B, 2004. "Copycat Funds: Information Disclosure Regulation and the Returns to Active Management in the Mutual Fund Industry," Journal of Law and Economics, University of Chicago Press, vol. 47(2), pages 515-541, October.Full references (including those not matched with items on IDEAS)
- Mary Margaret Myers & James M. Poterba & Douglas A. Shackelford, 2001. "Copycat Funds: Information Disclosure Regulation and the Returns to Active Management in the Mutual Fund Industry," NBER Working Papers 8653, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:eee:jfinin:v:19:y:2010:i:2:p:169-187. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.