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

109 Pages Posted: 16 Nov 2014 Last revised: 21 Oct 2023

See all articles by Alexander Hillert

Alexander Hillert

Goethe University Frankfurt - Department of Finance; Leibniz Institute for Financial Research SAFE

Alexandra Niessen-Ruenzi

University of Mannheim, Department of Finance; University of Mannheim - Department of Finance

Stefan Ruenzi

University of Mannheim - Department of International Finance

Date Written: October 2, 2023

Abstract

Fund companies regularly send shareholder letters to their investors. We use textual analysis to investigate whether these letters’ writing style influences fund flows and whether it predicts performance and investment styles. Fund investors react to the tone and content of shareholder letters: A less negative tone leads to higher net flows. Thus, fund companies can use shareholder letters as a tactical instrument to influence flows. However, at the same time, a dishonest communication that is not consistent with the fund’s actual performance decreases flows. A positive writing style predicts higher idiosyncratic risk as well as more style bets, while there is no consistent predictive power for future performance.

Keywords: Fund Flows, Textual Analysis, Shareholder Letters, Investment Styles

JEL Classification: G23, G11

Suggested Citation

Hillert, Alexander and Niessen-Ruenzi, Alexandra and Niessen-Ruenzi, Alexandra and Ruenzi, Stefan, Mutual Fund Shareholder Letters: Flows, Performance, and Managerial Behavior (October 2, 2023). SAFE Working Paper No. 380, 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

Leibniz Institute for Financial Research SAFE ( email )

House of Finance
Theodor-W.-Adorno-Platz 3
Frankfurt, 60323
Germany

Alexandra Niessen-Ruenzi

University of Mannheim, Department of Finance ( email )

L9, 1-2
Mannheim, 68131
Germany
+49 621 181 1595 (Phone)

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1,427
Abstract Views
5,829
Rank
25,843
PlumX Metrics