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Conflicting Family Values in Mutual Fund FamiliesUtpal BhattacharyaIndiana University Bloomington - Department of Finance Jung Hoon LeeTulane University - A. B. Freeman School of Business, Department of Finance Veronika Krepely PoolIndiana University Bloomington - Department of Finance March 31, 2012 Journal of Finance, Forthcoming 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 SeriesDate posted: April 2, 2012Suggested CitationContact Information
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