Growing Beyond Performance

44 Pages Posted: 19 Jul 2017 Last revised: 26 Jan 2018

See all articles by Wenxi Jiang

Wenxi Jiang

CUHK Business School, The Chinese University of Hong Kong

Mindy Z. Xiaolan

University of Texas, Austin - Department of Finance

Date Written: July 15, 2017

Abstract

The mutual fund literature has largely focused on identifying fund manager skills but finds little evidence of the existence of persistent superior performance. Nonetheless, mutual fund companies do not allocate all human resources to portfolio management; rather, a significant share of employment in the U.S. mutual fund companies is devoted to marketing and sales (21\% on average). We find that mutual fund companies that have higher marketing employee ratio exhibit higher subsequent asset growth, which is not driven by better performance. Two channels together contribute to this phenomenon: (1) marketing employees maintain the convexity of the flow-to-performance relationship as the company grows, and (2) fund companies that allocate more human capital to marketing simultaneously choose to set higher variability in performance at both the fund and company levels. Allocating human capital toward marketing is a tactic to further spur growth in the lack of performance persistence.

Keywords: Human Capital, Marketing Employees, Flow-to-Performance Sensitivity, Variability

Suggested Citation

Jiang, Wenxi and Xiaolan, Mindy Z., Growing Beyond Performance (July 15, 2017). Available at SSRN: https://ssrn.com/abstract=3002922 or http://dx.doi.org/10.2139/ssrn.3002922

Wenxi Jiang (Contact Author)

CUHK Business School, The Chinese University of Hong Kong ( email )

Room 1250, Cheng Yu Tung Building
Chinese University of Hong Kong
Shatin, NT 06520
Hong Kong

Mindy Z. Xiaolan

University of Texas, Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States

HOME PAGE: http://sites.google.com/view/mindyxiaolan

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