Managerial Sharing, Mutual Fund Connections, and Performance

29 Pages Posted: 3 Sep 2015

See all articles by Cathline Augustiani

Cathline Augustiani

GMO- Sydney

Lorenzo Casavecchia

University of Technology Sydney, Finance Discipline Group

Jack Gray

University of Technology Sydney (UTS)

Date Written: September 2015

Abstract

In this study, we examine the effect of mutual fund connections, through managerial sharing, on performance and stock holding commonalities. Our analysis of return correlations and portfolio holdings indicates that more interconnected funds tend to buy and sell similar stocks, hence increasing the similarity of portfolio holdings and undermining the distinctiveness of their investment strategy. Our results also indicate that highly connected funds significantly underperform weakly connected funds by about 1.4% on a yearly risk‐adjusted basis. We show that fund family performance is unaffected by the intensity of fund connections, and that greater fund connections could significantly enhance family‐level profit margins.

JEL Classification: G11, G12, G23

Suggested Citation

Augustiani, Cathline and Casavecchia, Lorenzo and Gray, Jack, Managerial Sharing, Mutual Fund Connections, and Performance (September 2015). International Review of Finance, Vol. 15, Issue 3, pp. 427-455, 2015, Available at SSRN: https://ssrn.com/abstract=2655214 or http://dx.doi.org/10.1111/irfi.12054

Cathline Augustiani

GMO- Sydney

1 Alfred St
Level 12
Sydney
Australia

Lorenzo Casavecchia (Contact Author)

University of Technology Sydney, Finance Discipline Group ( email )

8 Ultimo Rd
Sydney, NSW 2007
Australia

Jack Gray

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

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