New Mutual Fund Clustering
53 Pages Posted: 24 Jun 2019 Last revised: 23 Sep 2020
Date Written: September 18, 2020
Over time, new mutual fund volume varies across the states of the economy, and largely clusters in periods where the market is "hot". This phenomenon relates (i) to upcoming IPO-related investment opportunities, which correlate with the economic environment cross-sectionally, and (ii) to fund family’s decisions to exploit more such investment opportunities by opening new funds rather than by using existing funds. A substantial portion of new funds receive IPO allocations within the 1-year period after inception, and outperform and attract greater investment flows. Overall, the evidence suggests that new fund clustering is due to an effective fund family strategy.
Keywords: New Fund, Fund Clustering, IPO Allocation, Fund Family.
JEL Classification: G11, G20
Suggested Citation: Suggested Citation