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Subcontracting in International Asset Management: New Evidence on Market Integration

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  • Massa, Massimo
  • Schumacher, David

Abstract

We study the decisions of international asset managers to outsource portfolio management of their funds and we link these decisions to market integration. Using a structural model of selfselection, we endogenize the decision to outsource in a comprehensive sample of international mutual funds and identify both performance and non-performance related determinants of outsourcing. Outsourcing fund management generates net positive gains to fund families of around 8-17 bp per month despite the ex-post underperformance of outsource funds relative to inhouse funds. Then, we establish that the performance improvements from outsourcing are directly related to segmentation in the underlying asset markets.

Suggested Citation

  • Massa, Massimo & Schumacher, David, 2015. "Subcontracting in International Asset Management: New Evidence on Market Integration," CEPR Discussion Papers 10465, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10465
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    References listed on IDEAS

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    More about this item

    Keywords

    International markets; market integration; Mutual funds; Outsourcing;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • 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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