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Managerial Investment in Mutual Funds

  • Abigail S. Hornstein

    ()

    (Department of Economics, Wesleyan University)

  • James Hounsell

    (Centerview Partners, New York)

The SEC requires mutual fund managers to disclose annually investments in self-managed funds. We examine whether such investments align managerial and investor interests using a hand- collected panel dataset at nearly 400 no load funds. We believe we are the first to document and examine the time series variation in these investments. Managerial investment fluctuates markedly within funds, contrary to prior researchers’ assumptions that the levels would be non- decreasing, and is not systematically related to fund characteristics. Fund returns are higher for solo-managed funds with managerial investment. On the other hand, team-managed funds have lower excess returns and management fees when managers invest more in the fund. These results suggest that managerial investment does not signal interest alignment but is rather an idiosyncratic personal decision.

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File URL: http://repec.wesleyan.edu/pdf/ahornstein/2013005_hornstein.pdf
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Paper provided by Wesleyan University, Department of Economics in its series Wesleyan Economics Working Papers with number 2013-005.

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Length: 54 pages
Date of creation: Feb 2013
Date of revision:
Handle: RePEc:wes:weswpa:2013-005
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Web page: http://www.wesleyan.edu/econ/

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