Asset Management and Financial Conglomerates: Attention through Stellar Portfolios

Abstract

This paper provides evidence that stock returns of financial conglomerates are affected by how successful certain funds of its asset management division are. The results indicate a spillover effect between management companies with top-performing funds and the stocks of the parent firm. I find that the presence of star funds affects stock returns in ways consistent with investor attention, suggesting that the boost in returns is due not only to an increase in fee revenues accruing to the funds but also an increase in firm visibility. Additional analyses suggest that managers tend to opportunistically adjust the odds of having star funds to exploit the return effect. These findings suggest that financial institutions can benefit from operating an asset management unit, as they create a brand reputation and benefit from spillover effects.

Keywords: Investor Attention, Stock Prices, Mutual Fund, Asset Management, Star Funds, Financial Distress, Managerial Behavior, Corporate Events

JEL Classification: G12, G21, G24, M37