To Group or Not to Group? Evidence from Mutual Fund Databases
50 Pages Posted: 29 Apr 2012 Last revised: 14 Mar 2016
Date Written: March 5, 2015
Despite the overwhelming trend in mutual funds towards team management, empirical studies find no performance benefits for this phenomenon. We show it is caused by large discrepancies in reported managerial structures in CRSP and Morningstar Principia datasets versus SEC records, resulting in up to 50 bps underestimation of the team impact on fund returns. Using more accurate Morningstar Direct data, we find that team-managed funds outperform single-managed funds across various performance metrics. The relation between team size and fund performance is nonlinear. Also, team-managed funds take no more risk than single-managed funds. Overall, team management benefits the fund industry performance.
Keywords: Database discrepancy, Management structure, Performance evaluation, Portfolio holdings
JEL Classification: D70, G23, J24
Suggested Citation: Suggested Citation