What is in a Name? Mutual Fund Flows When Managers Have Foreign-Sounding Names

Abstract

We show that name-induced stereotypes affect the investment choices of U.S. mutual fund investors. Managers with foreign-sounding names have about 10% lower annual fund flows and this effect is stronger among funds with investor clienteles more likely to be suspicious of foreigners. Foreign-name managers experience lower appreciation (greater decline) in flows following good (bad) performance. Following 9/11, flows to funds with managers with Middle-Eastern sounding names decline abnormally. In an experimental setting where skill differences are absent, individuals allocate 11% less money to an index fund managed by a foreign-name manager. This gap widens following the Boston marathon bombings.