The Relevance of Portfolio Management Core Competencies in Outsourcing Decisions

50 Pages Posted: 29 Sep 2013 Last revised: 15 Oct 2014

David Moreno

Universidad Carlos III de Madrid - Department of Business Administration

Rosa Rodríguez

Universidad Carlos III de Madrid - Department of Business Administration

Rafael Zambrana

Nova School of Business and Economics

Date Written: October 2014

Abstract

This empirical paper analyzes the role of investment companies’ core competencies in explaining the growing importance of outsourcing within the mutual fund industry. We demonstrate that management companies tend to allocate portfolios that are not within their core competencies (defined as the main asset classes or investment objectives managed) to subadvisors whose core competency coincides with the outsourced mutual fund. We investigate the efficiency of such decisions in terms of performance, and the findings suggest that selecting a subadvisor according to core competency improves mutual fund performance. We also observe evidence that in-house fund management improves when firms outsource their non-core funds.

Keywords: Outsourcing, Subadvisor, Mutual Funds, Efficiency, Management Company, Fund Family, Core Competency, Portfolio Management

JEL Classification: G12

Suggested Citation

Moreno, David and Rodríguez, Rosa and Zambrana, Rafael, The Relevance of Portfolio Management Core Competencies in Outsourcing Decisions (October 2014). Available at SSRN: https://ssrn.com/abstract=2332655 or http://dx.doi.org/10.2139/ssrn.2332655

David Moreno

Universidad Carlos III de Madrid - Department of Business Administration ( email )

Calle Madrid 126
Getafe, Madrid, Madrid 28903
Spain

Rosa Rodriguez

Universidad Carlos III de Madrid - Department of Business Administration ( email )

Calle Madrid 126
Getafe, Madrid, Madrid 28903
Spain

HOME PAGE: http://www.business.uc3m.es/en/faculty/profesor/perfil/42

Rafael Zambrana (Contact Author)

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, Lisbon 1099-032
Portugal

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