Asset Management within Commercial Banking Groups: International Evidence
78 Pages Posted: 28 Dec 2014 Last revised: 15 Aug 2017
Date Written: August 14, 2017
We study the performance of equity mutual funds run by asset management divisions of commercial banking groups using a worldwide sample. We show that bank-affiliated funds underperform unaffiliated funds by 92 basis points per year. Consistent with conflicts of interest, the underperformance is more pronounced among those affiliated funds that overweight more the stock of the bank’s lending clients. Divestitures of asset management divisions by banking groups support a causal interpretation of the results. Our findings suggest that affiliated fund managers support their lending divisions’ operations to reduce career concerns at the expense of fund investors.
Keywords: Mutual funds, Fund performance, Conflicts of interest, Universal banking
JEL Classification: G11, G23, G32
Suggested Citation: Suggested Citation