Mutual Fund Shareholder Letters: Flows, Performance, and Managerial Behavior

72 Pages Posted: 16 Nov 2014 Last revised: 30 Mar 2016

See all articles by Alexander Hillert

Alexander Hillert

Goethe University Frankfurt - Department of Finance

Alexandra Niessen-Ruenzi

University of Mannheim - Department of Finance

Stefan Ruenzi

University of Mannheim - Department of International Finance

Date Written: March 29, 2016

Abstract

Fund companies regularly send shareholder letters to their investors. We use textual analysis to investigate whether these letters matter for fund flows and whether they predict performance and investment styles. We find that fund investors react to the writing style of shareholder letters; a less negative tone and a personal writing style lead to higher net flows. Thus, fund companies can use shareholder letters as a strategic instrument to avoid redemptions. Letter writing style is informative for fund investors as it predicts changes in fund managers' risk taking and investment styles. A personal writing style additionally predicts better fund performance.

Keywords: Fund Flows, Textual Analysis, Shareholder Letters, Investment Styles, Form N-CSR, Fund Performance

JEL Classification: G23, G11

Suggested Citation

Hillert, Alexander and Niessen-Ruenzi, Alexandra and Ruenzi, Stefan, Mutual Fund Shareholder Letters: Flows, Performance, and Managerial Behavior (March 29, 2016). Available at SSRN: https://ssrn.com/abstract=2524610 or http://dx.doi.org/10.2139/ssrn.2524610

Alexander Hillert (Contact Author)

Goethe University Frankfurt - Department of Finance ( email )

House of Finance
Grueneburgplatz 1
Frankfurt am Main, Hessen 60323
Germany

Alexandra Niessen-Ruenzi

University of Mannheim - Department of Finance ( email )

Mannheim, 68131
Germany

Stefan Ruenzi

University of Mannheim - Department of International Finance ( email )

L9, 1-2
Mannheim, 68131
Germany

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