Horses for Courses: Fund Managers and Organizational Structures
University of Colorado at Denver - Business School
Thomas H. Noe
University of Oxford - Said Business School; University of Oxford - Balliol College; European Corporate Governance Institute
Michael J. Rebello
University of Texas at Dallas - Naveen Jindal School of Management
March 9, 2012
We model and test the relations between the team management of mutual funds, fund manager ability, fund performance, and holdings. Our model predicts that team-managed funds will perform better, allocate their funds more conservatively, and trade less aggressively than single-manager funds. However, high ability managers will rationally self-select into single-manager funds. Consistent with the model's prediction we find that team-managed funds outperform single-manager funds with the same characteristics by 23 to 38 basis point a year. This superior performance is only discernible once we control for the endogenous self-selection of managers. Also consistent with the model's predictions, we find that team-managed funds deviate less from their benchmark allocations and trade less aggressively in response to changes in sell-side analyst recommendations.
Number of Pages in PDF File: 58
Keywords: Team Management, Fund Performance, Fund Holdings, Self Selection
JEL Classification: G29working papers series
Date posted: March 20, 2012
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