Outsourcing in the International Mutual Fund Industry: An Equilibrium View

85 Pages Posted: 13 Oct 2011 Last revised: 8 Oct 2014

See all articles by Oleg Chuprinin

Oleg Chuprinin

UNSW; Financial Research Network (FIRN)

Massimo Massa

INSEAD - Finance

David Schumacher

McGill University

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2014

Abstract

We study outsourcing relationships among international asset management firms. We find that in companies that manage both outsourced and inhouse funds, inhouse funds outperform outsourced funds by 0.85% annually (57% of the expense ratio). We attribute this result to preferential treatment of inhouse funds via the preferential allocation of IPOs, trading opportunities and cross-trades, especially at times when inhouse funds face steep outflows and require liquidity. We explain preferential treatment with agency problems: it increases with the subcontractor’s market power and the difficulty of monitoring the subcontractor and decreases with the subcontractor’s amount of parallel inhouse activity.

Keywords: Mutual Funds, Performance, Outsourcing, International Markets

JEL Classification: G15, G23, G30, G32

Suggested Citation

Chuprinin, Oleg and Massa, Massimo and Schumacher, David, Outsourcing in the International Mutual Fund Industry: An Equilibrium View (September 1, 2014). Journal of Finance, Forthcoming; Paris December 2011 Finance Meeting EUROFIDAI - AFFI. Available at SSRN: https://ssrn.com/abstract=1943479 or http://dx.doi.org/10.2139/ssrn.1943479

Oleg Chuprinin

UNSW ( email )

Room 349, UNSW Business School
High St
UNSW Sydney, NSW 2052
Australia
406674419 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

David Schumacher (Contact Author)

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada
5143984778 (Phone)

HOME PAGE: http://www.davidschumacher.info

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
222
Abstract Views
1,194
rank
120,181
PlumX Metrics