Performance and Characteristics of Actively Managed Institutional Equity Mutual Funds

Abstract:     
We investigate the relation between the performance and characteristics of 1,118 domestic, actively managed institutional equity mutual funds. The results show that large funds tend to perform better, which suggests the presence of significant economies of scale. The evidence indicates a positive relation between cash holdings and performance. We obtain mixed results involving the role of turnover, beta, and dividend yield as related to performance. We find evidence in a univariate analysis that expense ratio class is an important determinant of performance, and the results are significant in a multivariate setting using Miller's active alpha as a performance metric.

Keywords: mutual funds, institutional actively managed, economies of scale, fund performance and characteristics, expense ratios, active alpha

JEL Classifications: G2, G23, G28

Working Paper Series