Why Is Investors' Mutual Fund Market Allocation Far from the Optimum?
42 Pages Posted: 10 Jun 2019
Date Written: 2017
We analyse the differences between the optimal portfolio of funds that a fully in-formed investor might select and the current structure of the mutual fund markets as characterized by the funds’ risk profile (conservative or aggressive) and target investor type (retail or wholesale). We find that the relationship between fund age, market share and change in total net assets – but not fees – and the optimal portfo-lio of funds depends on the structure of the mutual fund market.
Keywords: optimal portfolio of funds, fund characteristics, risk profile, retail, friction
JEL Classification: G11, G19
Suggested Citation: Suggested Citation