Asset Management within Commercial Banking Groups: International Evidence

77 Pages Posted: 20 Nov 2017  

Miguel A. Ferreira

Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Pedro P. Matos

University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)

Pedro Pires

Nova School of Business and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: November 16, 2017

Abstract

We study the performance of equity mutual funds run by asset management divisions of commercial banking groups using a worldwide sample. We show that bank-affiliated funds under-perform unaffiliated funds by 92 basis points per year. Consistent with conflicts of interest, the under-performance is more pronounced among those affiliated funds that overweight more the stock of the bank’s lending clients. Divestitures of asset management divisions by banking groups support a causal interpretation of the results. Our findings suggest that affiliated fund managers support their lending divisions’ operations to reduce career concerns at the expense of fund investors.

Keywords: Mutual funds, Fund performance, Conflicts of interest, Universal banking

JEL Classification: G11, G23, G32

Suggested Citation

Ferreira, Miguel A. and Matos, Pedro P. and Pires, Pedro, Asset Management within Commercial Banking Groups: International Evidence (November 16, 2017). Journal of Finance, Forthcoming; Darden Business School Working Paper No. 3072196. Available at SSRN: https://ssrn.com/abstract=3072196

Miguel Almeida Ferreira (Contact Author)

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Pedro P. Matos

University of Virginia - Darden School of Business ( email )

University of Virginia
P.O. Box 6550
Charlottesville, VA 22906-6550
United States

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Pedro M. Pires

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

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