Asset Management within Commercial Banking Groups: International Evidence

78 Pages Posted: 28 Dec 2014 Last revised: 15 Aug 2017

Miguel A. Ferreira

Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Pedro P. Matos

University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)

Pedro Pires

Nova School of Business and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 14, 2017

Abstract

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

Ferreira, Miguel A. and Matos, Pedro P. and Pires, Pedro, Asset Management within Commercial Banking Groups: International Evidence (August 14, 2017). Darden Business School Working Paper No. 2543175. Available at SSRN: https://ssrn.com/abstract=2543175 or http://dx.doi.org/10.2139/ssrn.2543175

Miguel Almeida Ferreira (Contact Author)

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Pedro P. Matos

University of Virginia - Darden School of Business ( email )

University of Virginia
P.O. Box 6550
Charlottesville, VA 22906-6550
United States

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Pedro M. Pires

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

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