The Exclusive Role of Centralized Fund Family Management

Abstract

Fund families are centrally managed, and can directly control resource allocations between funds. We quantify multiple manageable fund family attributes, and examine their combined effects upon returns and investor flows. We focus upon five attributes that are exclusively manageable by fund families: marginal fee economies of scale, star fund offerings, mixed high and low risk product offerings, within-family manager scope, and manager outsourcing. We find sensitivity differences during financial crisis and non-crisis time periods. Management of these exclusive attributes significantly improve a fund family’s returns and investor flows, benefiting fund families and their investors during both normal and financial crisis periods. We find that investors reward fund families with greater performance sensitive inflows and weaker performance sensitive outflows, indicating that investors identify greater utility in centrally managed fund families.

Keywords: mutual funds, investment performance, non-bank financial institutions

JEL Classification: G23