Advisory Firm Paths to Side-By-Side Management and Mutual Fund Performance

We examine whether the performance of mutual funds under side-by-side (SBS) management with hedge funds is affected by an adviser’s path to SBS management. When advisers start with mutual funds and follow the MFtoSBS path, their mutual funds tend to perform similarly to funds without SBS advisers. By contrast, when advisers start with hedge funds and follow the HFtoSBS path, their mutual funds outperform funds without SBS advisers, though outperformance is not observed when SBS management is conducted at the portfolio manager level. Additional analyses link our path results to managerial compensation, talent retention, and managerial experience.

Keywords: Investment Adviser, Mutual Funds, Side-by-Side Management, Performance, Compensation.

JEL Classification: G20, G23, G29

Suggested Citation: Suggested Citation

Bae, Jongwan and Haight, Tim and Kuang, Xin and Yin, Chengdong, Advisory Firm Paths to Side-By-Side Management and Mutual Fund Performance (May 30, 2023). Journal of Empirical Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3015830 or http://dx.doi.org/10.2139/ssrn.3015830