Asset Management within Commercial Banking Groups: International Evidence
77 Pages Posted: 20 Nov 2017
Date Written: November 16, 2017
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: Suggested Citation