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

Review of Financial Studies, Forthcoming

56 Pages Posted: 2 Nov 2011 Last revised: 10 Jan 2015

See all articles by Alok Kumar

Alok Kumar

University of Miami - Miami Herbert Business School

Alexandra Niessen-Ruenzi

University of Mannheim - Department of Finance

Oliver G. Spalt

University of Mannheim - Business School; European Corporate Governance Institute (ECGI)

Date Written: January 4, 2015

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.

Suggested Citation

Kumar, Alok and Niessen-Ruenzi, Alexandra and Spalt, Oliver G., What is in a Name? Mutual Fund Flows When Managers Have Foreign-Sounding Names (January 4, 2015). Review of Financial Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1951524 or http://dx.doi.org/10.2139/ssrn.1951524

Alok Kumar (Contact Author)

University of Miami - Miami Herbert Business School ( email )

514 Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)

HOME PAGE: http://moya.bus.miami.edu/~akumar

Alexandra Niessen-Ruenzi

University of Mannheim - Department of Finance ( email )

Mannheim, 68131
Germany

Oliver G. Spalt

University of Mannheim - Business School ( email )

L5, 5
Mannheim, 68131
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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