Best Buys and Own Brands: Investment Platforms’ Recommendations of Mutual Funds
44 Pages Posted: 23 Aug 2017 Last revised: 24 Jan 2018
Date Written: January 23, 2018
Individual investors increasingly trade and hold mutual funds via investment platforms, many of which make their own fund recommendations. Using data from leading platforms in the U.K., we examine the drivers, impact, and performance of these recommendations. Platforms' recommendations favor funds with a low cost to investors, but also favor affiliated funds and those which share more of their commission revenues with platforms. Recommendations affect flows considerably, although investors somewhat discount recommendations of affiliated funds. Recommended funds outperform non-recommended funds overall, but recommended affiliated funds do not.
Keywords: Mutual Funds, Investment Platforms, Recommendations
JEL Classification: G11, G20
Suggested Citation: Suggested Citation