Industry-Level Returns to Scale and Investor Flows in Asset Management

63 Pages Posted: 23 Jul 2018

See all articles by Georgios Magkotsios

Georgios Magkotsios

University of Southern California, Marshall School of Business, Finance and Business Economics Department

Date Written: July 1, 2018

Abstract

This paper provides new evidence about returns to scale in asset management, and their connection with capital flows to funds by investors. Equity mutual funds have diminishing returns to scale at the industry level, while hedge and fixed income funds have increasing returns to scale. The flow-performance relation is convex (concave) when the funds operate under decreasing (increasing) returns to scale. Passive funds are unaffected by scale effects. These results are consistent with the predictions of Magkotsios (2018).

Keywords: Investment Management, Alpha, Returns to Scale, Mutual Funds, Bond Funds, Money Market Funds, Hedge Funds, Index Funds, ETF

JEL Classification: G11, G12, G23

Suggested Citation

Magkotsios, Georgios, Industry-Level Returns to Scale and Investor Flows in Asset Management (July 1, 2018). Available at SSRN: https://ssrn.com/abstract=3206239 or http://dx.doi.org/10.2139/ssrn.3206239

Georgios Magkotsios (Contact Author)

University of Southern California, Marshall School of Business, Finance and Business Economics Department ( email )

Los Angeles, CA
United States

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