Does Working from Home Impair Mutual Fund Performance?

Abstract

We use staggered U.S. state-level stay-at-home COVID-19 pandemic orders to study the effect of remote work on actively managed mutual fund performance. After implementation of working from home mandates, daily fund returns decrease by 90 basis points per day, corresponding to a daily $6 million economic loss per fund relative to investing in the market portfolio. Remote work decreases measures of managerial skill, especially for funds not within a family and funds which are non-team managed. Mandated working from home during the COVID-19 pandemic period impaired mutual fund performance by increasing frictions, which hinder idea sharing and information flows.

Keywords: Mutual Funds, COVID-19, Work from Home, Remote Work, Stay-at-home Order

JEL Classification: G23, G11, G38, J24