A Tale of Two Types: Generalists vs. Specialists in Asset Management

Abstract

Based on the observation that some managers run funds within a single style --specialists-- while others run funds across several investment categories -- generalists -- we study whether management companies use specific rules to appoint managers as specialists or generalists. We find that management companies earn higher returns when they appoint managers: (1) with security picking ability as specialists; (2) with market-timing ability as generalists. Consistent with optimal allocation, specialists with timing ability are more likely to be reassigned as generalists. We relate our findings to the multi-tasking literature that discusses "distraction" and "spillover" effects as competing factors.

Keywords: Mutual Fund, Asset Management, Human Capital, Portfolio Manager, Specialist, Generalist, Multi-tasking.

JEL Classification: G20, G23, J24, M51