You’re fired! New Evidence on Portfolio Manager Turnover and Performance

43 Pages Posted: 15 Mar 2011 Last revised: 16 Mar 2012

See all articles by Leonard Kostovetsky

Leonard Kostovetsky

Carroll School of Management, Boston College

Jerold B. Warner

University of Rochester – Simon Business School

Date Written: March 1, 2012

Abstract

We study managerial turnover for both internally managed mutual funds and those managed externally by subadvisors. We argue that turnover of subadvisors provides sharper tests of any underlying board and sponsor monitoring because these data are heavily weighted toward involuntary turnover. We find dramatically stronger inverse relations between subadvisor departures and lagged returns. We find no evidence of improvements in return performance related to departures, but flow improvements are associated with departures of poor past performers. Our findings represent new evidence on how investors, fund sponsors, and boards learn about and evaluate mutual fund management performance.

Keywords: Mutual Funds, Management Turnover, Subadvisors

JEL Classification: G11, G23

Suggested Citation

Kostovetsky, Leonard and Warner, Jerold B., You’re fired! New Evidence on Portfolio Manager Turnover and Performance (March 1, 2012). Simon School Working Paper No. FR 11-11; AFA 2013 San Diego Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1785896 or http://dx.doi.org/10.2139/ssrn.1785896

Leonard Kostovetsky (Contact Author)

Carroll School of Management, Boston College ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

Jerold B. Warner

University of Rochester – Simon Business School ( email )

Carol Simon Hall 3-160H
Rochester, NY 14627
United States
585-275-2678 (Phone)
585-442-6323 (Fax)

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