The Best Mutual Fund Managers: Testing the Impact of Experience Using a Survivorship Bias Free Dataset

Journal of Applied Finance, Spring/Summer 2012, Volume 22, Issue 1, pp. 104-116

Posted: 29 Jul 2012

See all articles by Gary E. Porter

Gary E. Porter

Northeastern University

Jack Trifts

Bryant University - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: 2012

Abstract

This study uses a survivorship-bias free dataset spanning more than 80 years to identify the best mutual fund managers having tenure of ten years or more. We also examine the relationship between performance and tenure in a sample of 289 solo managers of 355 actively managed funds within the nine Morningstar styles. We find an inverse relationship between average annual returns and tenure, even after controlling for structural changes in mutual fund returns after 1996. The managers who survived more than ten years were likely to have performed at or above the market in their first three years, while their peers who did not survive as solo managers beyond three years significantly underperformed the market. Finally, while each of the very best managers generated positive compound annual market-adjusted returns following their first three years, the majority were not able to maintain their early levels of performance. This evidence is not indicative of a positive relationship between experience and performance.

Keywords: mutual fund managers, survivorship bias free, Performance, Tenure

Suggested Citation

Porter, Gary E. and Trifts, Jack, The Best Mutual Fund Managers: Testing the Impact of Experience Using a Survivorship Bias Free Dataset (2012). Journal of Applied Finance, Spring/Summer 2012, Volume 22, Issue 1, pp. 104-116. Available at SSRN: https://ssrn.com/abstract=2119200

Gary E. Porter (Contact Author)

Northeastern University ( email )

360 Huntington Ave.
Boston, MA 02115
United States
407-484-7520 (Phone)

Jack Trifts

Bryant University - Department of Finance ( email )

1150 Douglas Pike
Smithfield, RI 02917
United States

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