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Favouritism in Mutual Fund Families? Evidence on Strategic Cross-Fund Subsidization

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  • Gaspar, José-Miguel
  • Massa, Massimo
  • Matos, Pedro Pinto

Abstract

We investigate whether mutual fund families strategically transfer performance across member funds to favour those more likely to increase overall family profits. We find that ‘high family value’ funds (i.e., high fees or high past performers) overperform at the expense of ‘low value’ funds. Such a performance gap is above the one existing between similar funds not affiliated with the same family. Better allocations of underpriced IPO deals and opposite trades across member funds partly explain why high value funds overperform. Our findings highlight how the family organization prevalent in the mutual fund industry generates distortions in delegated asset management.

Suggested Citation

  • Gaspar, José-Miguel & Massa, Massimo & Matos, Pedro Pinto, 2004. "Favouritism in Mutual Fund Families? Evidence on Strategic Cross-Fund Subsidization," CEPR Discussion Papers 4788, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4788
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    References listed on IDEAS

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    4. Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, number grub99-1, January.
    5. Jonathan Gruber & David A. Wise, 1999. "Introduction to "Social Security and Retirement around the World"," NBER Chapters,in: Social Security and Retirement around the World, pages 1-35 National Bureau of Economic Research, Inc.
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    Keywords

    IPO; mutual funds;

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