To Switch or Not to Switch: The Role of Asset Growth on Fund Management Structure

45 Pages Posted: 18 Aug 2017 Last revised: 8 Nov 2017

See all articles by Eric K. M. Tan

Eric K. M. Tan

University of Queensland - Business School

Date Written: August 17, 2017

Abstract

This paper examines how mutual funds respond to constraints imposed by asset growth. We find a fund’s decision to switch management structure to be largely driven by asset growth. However, we find little evidence that changes in management structure are associated with superior fund performance, possibly due to the limited investment ideas of fund managers. Finally, we find that investors respond negatively to funds that change their management structure. Our overall findings are consistent with prior literature on the prevalence of diseconomies of scale in mutual funds and have significant policy implications for regulators in terms of how funds should be regulated as they grow larger.

Keywords: Mutual Funds, Management Structure, Asset Growth, Performance, Fund Flows

JEL Classification: G23, G28

Suggested Citation

Tan, Eric K. M., To Switch or Not to Switch: The Role of Asset Growth on Fund Management Structure (August 17, 2017). 30th Australasian Finance and Banking Conference 2017. Available at SSRN: https://ssrn.com/abstract=3021310 or http://dx.doi.org/10.2139/ssrn.3021310

Eric K. M. Tan (Contact Author)

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

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