Fund Flows, Manager Change and Performance Persistence

65 Pages Posted: 22 Jun 2020

See all articles by Wolfgang Bessler

Wolfgang Bessler

University of Hamburg

David P. Blake

City, University of London

Peter Lueckoff

Justus-Liebig-University Giessen

Ian Tonks

University of Bristol - Department of Finance and Accounting

Date Written: May 2017

Abstract

Most empirical studies suggest that mutual funds do not persistently outperform an appropriate benchmark in the long run. We analyze this lack of persistence in terms of two equilibrating mechanisms: fund flows and manager changes. Using data on actively managed U.S. equity mutual funds, we find that if neither mechanism is operating, winner funds (top-decile ranked in previous year) continue to significantly outperform loser funds (bottom-decile ranked in previous year) by 4.08 percentage points per annum. However, the difference between previous winner and loser funds declines to zero within one year if the two mechanisms are acting together. Thus, mutual fund out- and underperformance is unlikely to persist in well-functioning markets.

Keywords: Mutual funds, performance persistence, fund flows, manager changes

JEL Classification: G28, G29, G32

Suggested Citation

Bessler, Wolfgang and Blake, David P. and Lueckoff, Peter and Tonks, Ian, Fund Flows, Manager Change and Performance Persistence (May 2017). Available at SSRN: https://ssrn.com/abstract=3612337 or http://dx.doi.org/10.2139/ssrn.3612337

Wolfgang Bessler

University of Hamburg ( email )

Allende-Platz 1
Hamburg, 20146
Germany

David P. Blake (Contact Author)

City, University of London ( email )

106 Bunhill Row
London, EC1Y 8TZX
Great Britain
+44 (0) 20-7040-8600 (Phone)
+44 (0) 20-7040-8881 (Fax)

HOME PAGE: http://www.pensions-institute.org/

Peter Lueckoff

Justus-Liebig-University Giessen ( email )

Center for Finance and Banking
Licher Strasse 74
Giessen, 35394
Germany
+49 641 9922464 (Phone)
+49 641 9922469 (Fax)

HOME PAGE: http://wiwi.uni-giessen.de/home/bessler

Ian Tonks

University of Bristol - Department of Finance and Accounting ( email )

Department of Finance and Accounting
15-19 Tyndalls Park Road
Bristol, BS8 1PQ
United Kingdom

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