Abstract

http://ssrn.com/abstract=589801
 
 

References (45)



 
 

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Prudent Man or Agency Problem? On the Performance of Insurance Mutual Funds


Xuanjuan Chen


Shanghai University of Finance and Economics

Tong Yao


University of Iowa - Henry B. Tippie College of Business

Tong Yu


University of Rhode Island - College of Business Administration

August 2006


Abstract:     
This study analyzes the performance of active equity mutual funds managed by insurance companies and their subsidiaries. We document that insurance funds underperform non-insurance peers by more than one percent in average annual returns. Two possible explanations are examined: conservatism in risk-taking and lack of incentive to pursue superior performance. There is no evidence that insurance funds make less risky investments; instead they have lower risk-adjusted returns. Further, insurance fund flows are less sensitive to performance when they perform poorly, and the investors they attract appear to be less sophisticated. Finally, across insurance funds, those whose parents spend heavily on advertising, those directly established by insurers or using parents' brand names, and those whose managers simultaneously manage a substantial amount of non-mutual-fund assets, are more likely to underperform. We conclude that insurers' efforts to cross-sell mutual funds may aggravate agency problems that erode fund performance.

Number of Pages in PDF File: 46

Keywords: Mutual fund performance, flow, agency problem, insurance

JEL Classification: G11, G22

working papers series


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Date posted: October 26, 2004  

Suggested Citation

Chen, Xuanjuan and Yao, Tong and Yu, Tong, Prudent Man or Agency Problem? On the Performance of Insurance Mutual Funds (August 2006). Available at SSRN: http://ssrn.com/abstract=589801 or http://dx.doi.org/10.2139/ssrn.589801

Contact Information

Xuanjuan Chen
Shanghai University of Finance and Economics ( email )
777 Guoding Road
Shanghai, Shanghai 200433
China
Tong Yao
University of Iowa - Henry B. Tippie College of Business ( email )
108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
Tong Yu (Contact Author)
University of Rhode Island - College of Business Administration ( email )
Kingston, RI 02881
United States
(401) 874-7415 (Phone)
(401) 874-4312 (Fax)
HOME PAGE: http://www.cba.uri.edu/tong
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