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Do Shareholders' Preferences Affect their Funds' Management? Evidence from the Cross Section of Shareholders and Funds

Author

Listed:
  • Susan Christoffersen
  • Christopher C. Geczy
  • David K. Musto
  • Adam V. Reed

Abstract

We consider how fund managers respond to the conflicting preferences of their investors. We focus on the conflict between the taxable and retirement accounts of international funds, which face different tradeoffs between dividends and capital gains. In principle, managers could resolve this conflict through dividend arbitrage, but a proprietary database of dividend-arbitrage transactions shows that in practice they cannot. Thus, managers must resolve it through their investment policies, and we find robust evidence that managers with more retirement money favor the preferences of retirement investors. We find additional evidence in the difference between U.S. and Canadian funds' portfolio weights. Nous étudions comment les gestionnaires de fonds réagissent aux préférences contradictoires de leurs investisseurs. Notre étude se concentre principalement sur les conflits entre les comptes taxés et les comptes de retraite des fonds internationaux qui font l'objet de compromis différents entre les gains en dividendes et les gains de capital. En théorie, les gestionnaires peuvent résoudre ces conflits par des opérations d'arbitrage sur les dividendes, mais une base de données privée d'opérations d'arbitrage fait apparaître qu'en pratique ils ne peuvent pas. Les gestionnaires doivent alors résoudre ces conflits à travers leurs politiques d'investissement, et nous trouvons des résultats significatifs montrant que ceux dont le capital est issu majoritairement des retraites favorisent les investisseurs de fonds de pension. Nous trouvons également des différences entre les poids des portefeuilles de fonds américains et canadiens.

Suggested Citation

  • Susan Christoffersen & Christopher C. Geczy & David K. Musto & Adam V. Reed, 2004. "Do Shareholders' Preferences Affect their Funds' Management? Evidence from the Cross Section of Shareholders and Funds," CIRANO Working Papers 2004s-22, CIRANO.
    • Handle: RePEc:cir:cirwor:2004s-22
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    References listed on IDEAS

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