50 Pages Posted: 18 Sep 2015 Last revised: 1 Sep 2016
Date Written: August 29, 2016
We examine a unique characteristic of mutual fund governance: a common set of directors serving simultaneously on the boards of multiple funds within a family. Using data on all domestic U.S. equity mutual funds listed in CRSP in 2007, we study board structure at 3,948 funds belonging to 328 fund families. 59% of the funds in our sample have unitary board structures where a single board oversees all funds within the complex. Among the fund families with non-unitary board structures, the directors of an individual fund oversee 74 percent of the funds within the family, on average. Investors obtain mixed benefits from overlapping boards: higher fund returns and better fund manager quality but also higher marketing and distribution fees. Fund families, on the other hand, seem to benefit from board overlaps. Strategic performance transfer and window dressing, which have been shown to serve family preferences for the creation of star funds, are more common. We conclude that overlapping boards are not fully compatible with investors' interests.
Keywords: mutual funds, mutual fund families, board of directors, governance
JEL Classification: G23, G11, G34, G38
Suggested Citation: Suggested Citation
Hornstein, Abigail S. and Sisli Ciamarra, Elif, Board Overlaps in Mutual Fund Families (August 29, 2016). Available at SSRN: https://ssrn.com/abstract=2661860