Do Mutual Funds Represent Individual Investors?

Abstract

Although mutual funds have distinctive voting patterns, little is known about whether their votes reflect their underlying investors’ preferences. I use novel proprietary data on individual shareholder voting and fund ownership to compare the voting preferences of individual investors to those of their funds. Fund votes have no relation to the votes of their underlying customers, with the sole exception of sorting by ideological individuals into small, like-minded ESG funds. Limited attention provides some explanation for the minimal ideological sorting: investors choose investments, both equities and funds, based on the investments’ blunt ideological features but not on subtle features.

Keywords: Shareholder Voting, ESG Funds, Individual Investor Voting, Shareholder Proposals, Corporate Governance

JEL Classification: G11, G18, G23, G34, G38