New Mutual Fund Clustering

53 Pages Posted: 24 Jun 2019 Last revised: 23 Sep 2020

See all articles by Ariel Gu

Ariel Gu

Durham University Business School

Christodoulos Louca

Cyprus University of Technology

Date Written: September 18, 2020

Abstract

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

Gu, Ariel and Louca, Christodoulos, New Mutual Fund Clustering (September 18, 2020). Available at SSRN: https://ssrn.com/abstract=3409491 or http://dx.doi.org/10.2139/ssrn.3409491

Ariel Gu (Contact Author)

Durham University Business School ( email )

Mill Hill Lane
Durham, DH1 3LB
United Kingdom

Christodoulos Louca

Cyprus University of Technology ( email )

Limassol, 3603
Cyprus

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