Fund of Funds Selection of Mutual Funds Superior Knowledge versus Family and Management Goals

47 Pages Posted: 5 Apr 2017

See all articles by Edwin J. Elton

Edwin J. Elton

New York University (NYU) - Department of Finance

Martin J. Gruber

New York University (NYU) - Department of Finance

Andre de Souza

St. John's University - Department of Economics and Finance; New York University (NYU) - Department of Finance

Date Written: March 8, 2017

Abstract

Managers of Fund of Funds have access to information not available to the general public in evaluating funds from their own family. However, they may have family or self‐serving motives that can hurt shareholder performance. By examining a history of individual transactions of Funds of Funds, we show that managers of Fund of Funds despite access to nonpublic information select individual funds that underperform random selection. Much of this underperformance is shown to be explained by managers satisfying a specific set of family and management goals. Fund of Funds that invest exclusively outside their fund family do not face these family and management goals and they outperform funds of funds then invest inside the family.

Suggested Citation

Elton, Edwin J. and Gruber, Martin J. and de Souza, Andre, Fund of Funds Selection of Mutual Funds Superior Knowledge versus Family and Management Goals (March 8, 2017). Available at SSRN: https://ssrn.com/abstract=2945662 or http://dx.doi.org/10.2139/ssrn.2945662

Edwin J. Elton

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
Ste 9-190
New York, NY 10012-1126
United States
212-998-0361 (Phone)
212-995-4233 (Fax)

Martin J. Gruber (Contact Author)

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
Ste 9-190
New York, NY 10012-1126
United States
212-998-0333 (Phone)
212-995-4233 (Fax)

Andre De Souza

St. John's University - Department of Economics and Finance ( email )

101 Astor Place, #244
New York, NY 10003
United States

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

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