Abstract

http://ssrn.com/abstract=1567267
 
 

References (59)



 


 



The Invisible Hand of Internal Markets in Mutual Fund Families


Luis Goncalves-Pinto


National University of Singapore

Juan M. Sotes-Paladino


University of Melbourne - Department of Finance

August 25, 2015


Abstract:     
We propose a model of fund families in which trades of illiquid holdings can be crossed internally. In the model, cross-trading is the result of decentralized decisions by fund managers attempting to beat different style benchmarks, and increases with style diversity within the family. It benefi ts the whole family even in the absence of a family-level strategy. However, it is opportunistic: it allows managers to deviate excessively from their benchmarks, imposing heavy agency costs on investors. We provide empirical support for novel predictions of our model. Our results suggest that prior research may have understated the implications of interfund transactions.

Number of Pages in PDF File: 50

Keywords: Mutual Fund Families, Cross-trading, Portfolio Delegation, Illiquidity

JEL Classification: C61, D60, D81, G11, G12, G23


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Date posted: March 10, 2010 ; Last revised: August 27, 2015

Suggested Citation

Goncalves-Pinto, Luis and Sotes-Paladino, Juan M., The Invisible Hand of Internal Markets in Mutual Fund Families (August 25, 2015). Available at SSRN: http://ssrn.com/abstract=1567267 or http://dx.doi.org/10.2139/ssrn.1567267

Contact Information

Luis Goncalves-Pinto (Contact Author)
National University of Singapore ( email )
Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore
HOME PAGE: http://luis.goncalvespinto.com
Juan M. Sotes-Paladino
University of Melbourne - Department of Finance ( email )
Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia
+61 3 9035 9827 (Phone)
+61 3834 6914 (Fax)
Feedback to SSRN


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