A Study of Analyst-Run Mutual Funds: The Abilities and Roles of Buy-Side Analysts

Abstract

We assess the abilities and the role of buy-side analysts within mutual fund families by analyzing mutual funds managed by buy-side analysts from fourteen fund families. Buy-side analysts exhibit investment abilities by realizing positive style- and risk-adjusted returns. Analysts’ skills have a positive impact on the performance of funds from the same family. Although some managers benefit from closely following their buy-side analysts’ ideas, research generated by these analysts is generally being underutilized by affiliated managers. The underutilization is consistent with entrenched managers choosing to forgo some of the analysts’ ideas due to career considerations.

Keywords: Mutual Funds, Portfolio Managers, Buy-Side Analysts, Performance Evaluation, Asset Management, Entrenchment

JEL Classification: G10, G20, G23, G29