Are Mutual Fund Manager Skills Transferable to Private Funds?
55 Pages Posted: 7 May 2019 Last revised: 7 Oct 2019
Date Written: October 6, 2019
We evaluate how work experience in mutual funds affects manager skills after they switched to private funds. Using a novel Chinese private fund database from 2012 to 2016, we document that private fund managers remarkably underperform compared with other fund managers, despite their work experience in mutual funds. Smart managers with superior track records in mutual funds are negatively affected and experience deteriorated investment skills after switching careers. Moreover, the reduction in the skills of smart managers is attributable to the loss of corporate support in research and marketing in private funds. Our findings demonstrate that the skill sets of mutual fund managers are not fully transferable to the private fund industry.
Keywords: private fund, investment skill, work experience
JEL Classification: G10, G11, G14
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