Abstract

http://ssrn.com/abstract=2047094
 
 

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To Group or Not to Group? Evidence from CRSP, Morningstar Principia, and Morningstar Direct Mutual Fund Databases


Saurin Patel


Richard Ivey School of Business, University of Western Ontario

Sergei Sarkissian


McGill University

July 27, 2014


Abstract:     
In spite of the overwhelming trend in the fund industry towards team management, empirical studies have found no clear performance benefits for this phenomenon. It results from large discrepancies in reported managerial structures in both CRSP and Morningstar Principia datasets versus SEC records. These discrepancies lead to the underestimation of team-managed fund performance. In fact, with a much more accurate Morningstar Direct data, which has a 95% plus match with SEC filings, team-managed funds exhibit higher average risk-adjusted returns than single-managed funds. This performance spread is present across all fund categories, except aggressive funds, and is robust to the inclusion of fund- and manager-level controls. The relation between team size and fund performance is non-linear and the largest team-induced gains are achieved by funds managed by three individuals. Furthermore, team-managed funds invest in a larger number of securities but hold more concentrated portfolios than single-managed funds. Finally, team-managed funds do not have excessive market or total risks; they trade less aggressively, charge lower fees, and generate some extra inflows for their funds. Thus, Morningstar Direct data shows that team-management is indeed useful for the fund industry.

Number of Pages in PDF File: 65

Keywords: Database discrepancy, Management structure, Performance evaluation, Portfolio holdings

JEL Classification: D70, G23, J24

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Date posted: April 29, 2012 ; Last revised: July 28, 2014

Suggested Citation

Patel, Saurin and Sarkissian, Sergei, To Group or Not to Group? Evidence from CRSP, Morningstar Principia, and Morningstar Direct Mutual Fund Databases (July 27, 2014). Available at SSRN: http://ssrn.com/abstract=2047094 or http://dx.doi.org/10.2139/ssrn.2047094

Contact Information

Saurin Patel
Richard Ivey School of Business, University of Western Ontario ( email )
1255 Western Road
Room 2303
London, Ontario N6G 0N1
Canada
519-661-4195 (Phone)
Sergei Sarkissian (Contact Author)
McGill University ( email )
1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada
514-398-4876 (Phone)
514-398-3876 (Fax)
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