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File name: SSRN-id2032183. ; Size: 248K
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Conflicting Family Values in Mutual Fund Families
Utpal Bhattacharya
Indiana University Bloomington - Department of Finance
Jung Hoon Lee
Tulane University - A. B. Freeman School of Business, Department of Finance
Veronika Krepely Pool
Indiana University Bloomington - Department of Finance
March 31, 2012
Forthcoming: Journal of Finance
Abstract:
We analyze the investment behavior of affiliated funds of mutual funds (AFoMFs), which are mutual funds that can only invest in other funds in the family, and are offered by most large families. Though never mentioned in any prospectus, we discover that AFoMFs provide an insurance pool against temporary liquidity shocks to other funds in the family. We show that though the family benefits because funds can avoid fire-sales, the cost of this insurance is borne by the investors in the AFoMFs. The paper thus uncovers some of the hidden complexities of fiduciary responsibility in mutual fund families.
Number of Pages in PDF File: 64
Keywords: mutual fund family, fund of funds, internal capital market, conflict of interest, fiduciary responsibility
JEL Classification: G23
Accepted Paper Series
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Date posted: September 12, 2010
; Last revised: April 2, 2012
Suggested CitationBhattacharya , Utpal, Lee, Jung Hoon and Pool, Veronika Krepely, Conflicting Family Values in Mutual Fund Families (March 31, 2012). Forthcoming: Journal of Finance. Available at SSRN: http://ssrn.com/abstract=1675503 or http://dx.doi.org/10.2139/ssrn.1675503
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